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Applications of Choquet expected utility to hypothesis testing with incompleteness

Author

Listed:
  • Hiroaki Kaido

    (Boston University)

  • Yi Zhang

    (Jinan University)

Abstract

The Maximin and Choquet expected utility theories guide decision-making under ambiguity. We apply them to hypothesis testing in incomplete models. We consider a statistical risk function that uses a prior probability to incorporate parameter uncertainty and a belief function to reflect the decision-maker’s willingness to be robust against the model’s incompleteness. We develop a numerical method to implement a test that minimizes the risk function. We also use a sequence of such tests to approximate a minimax optimal test when a nuisance parameter is present under the null hypothesis.

Suggested Citation

  • Hiroaki Kaido & Yi Zhang, 2023. "Applications of Choquet expected utility to hypothesis testing with incompleteness," The Japanese Economic Review, Springer, vol. 74(4), pages 551-572, October.
  • Handle: RePEc:spr:jecrev:v:74:y:2023:i:4:d:10.1007_s42973-023-00146-1
    DOI: 10.1007/s42973-023-00146-1
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