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The risk-structure dependence effect:Experimenting with an eye to decision-aiding

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  • M. Abdellaoui
  • B. Munier

Abstract

In this paper, we aim at obtaining, from an experimental design in decision makingunder risk, richer and more appropriate information for management scientists involved indecision7dash;aiding. We design a method of direct elicitation of individual indifference curvesin the Marschak Machina triangle (i.e., the set of all probability distributions over threefixed outcomes). Our results show that indifference curves clearly take quite different typesof shape according to their location within the triangle, i.e. that preferences under risk fundamentallydepend on the risk-structure (as defined in the paper) faced by the decision maker.Furthermore, the risk-structure dependence effect explains the indecisive results of previousexperimental/econometric studies trying to rank different models according to theirdescriptive power. Copyright Kluwer Academic Publishers 1998

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  • M. Abdellaoui & B. Munier, 1998. "The risk-structure dependence effect:Experimenting with an eye to decision-aiding," Annals of Operations Research, Springer, vol. 80(0), pages 237-252, January.
  • Handle: RePEc:spr:annopr:v:80:y:1998:i:0:p:237-252:10.1023/a:1018916031387
    DOI: 10.1023/A:1018916031387
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    Cited by:

    1. Hamza Bahaji, 2018. "Are employee stock option exercise decisions better explained through the prospect theory?," Annals of Operations Research, Springer, vol. 262(2), pages 335-359, March.
    2. Krzysztof Kontek, 2018. "Boundary effects in the Marschak-Machina triangle," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 13(6), pages 587-606, November.
    3. Bertrand Munier, 2001. "Risk Attitudes Appraisal and Cognitive Coordination in Decentralized Decision Systems," Group Decision and Negotiation, Springer, vol. 10(2), pages 141-158, March.

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