Comparing descriptive and theoretical models of decision-making under uncertainty and their relation to socioeconomic factors

This study examines the selection and validation of measurement models for decision-making under uncertainty, with particular emphasis on the integration of socioeconomic contexts in these models. We critically compared four distinct models, differing in their mathematical form of risk and ambiguity, to determine which best predicts willingness-to-pay behavior in a financial decision-making task. We used Bayesian hierarchical modeling to fit each measurement model and the Leave-One-Out Information Criteria to assess how each model performed. In a sample of 74 community members, we found that the maximal descriptive model — one that accounts for the variance across participants’ sensitivity to changes under risk and ambiguity — demonstrated superior predictive accuracy in out-of-sample testing. Notably, our results revealed that adding socioeconomic factors into the model improved prediction. Further, people from higher-income households exhibited a greater aversion to ambiguity, whereas those from lower-income households showed less aversion to ambiguity. There was a lack of association between annual household income and risk. These findings not only highlight the importance of rigorously validating measurement models but also underscore the pivotal role of socioeconomic factors in shaping decision-making under uncertainty. Future research should further investigate how aspects of socioeconomic background—such as childhood economic conditions and environmental unpredictability—influence decision-making. It also is important to test whether ambiguity aversion estimates, when contextualized by socioeconomic variables, can reliably predict real-world decision-making under uncertainty.