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Risk, Uncertainty and Discrete Choice Models

  • André de Palma

    ()

    (THEMA,University of Cergy-Pontoise)

  • Moshe Ben-Akiva

    (Massachusetts Institute of Technology)

  • David Brownstone

    (University of California at Irvine)

  • Charles Holt

    (University of Virginia)

  • Thierry Magnac

    (Toulouse School of Economics)

  • Daniel McFadden

    (University of California, Berkeley)

  • Peter Moffatt

    (University of East Anglia)

  • Nathalie Picard

    ()

    (University of Cergy-Pontoise)

  • Kenneth Train

    (University of California, Berkeley)

  • Peter Wakker

    (Erasmus University)

  • Joan Walker

    (Boston University)

This paper examines the cross-fertilizations of random utility models with the study of decision making under risk and uncertainty. We start with a description of the Expected Utility (EU) theory and then consider deviations from the standard EU frameworks, involving the Allais paradox and the Ellsberg paradox, inter alia. We then discuss how the resulting Non-EU framework can be modeled and estimated within the framework of discrete choices in static and dynamic contexts. Our objectives in addressing risk and ambiguity in individual choice contexts are to understand the decision choice process, and to use behavioral information for prediction, prescription and policy analysis.

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File URL: http://www.u-cergy.fr/thema/repec/2008-02.pdf
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Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2008-02.

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Date of creation: 2008
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Handle: RePEc:ema:worpap:2008-02
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  1. Anna Conte & John D Hey & Peter G Moffatt, 2007. "Mixture Models of Choice Under Risk," Discussion Papers 07/06, Department of Economics, University of York.
  2. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  3. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  4. Hugo Benítez-Silva & Debra S. Dwyer, 2005. "The Rationality of Retirement Expectations and the Role of New Information," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 587-592, August.
  5. Loomes, G. & Moffatt, P.G. & Sugden, R., 1998. "A Microeconometric Test of Alternative Stochastic Theories of Risky Choice," University of East Anglia Discussion Papers in Economics 9806, School of Economics, University of East Anglia, Norwich, UK..
  6. Jean-Pierre Dubé & K. Sudhir & Andrew Ching & Gregory Crawford & Michaela Draganska & Jeremy Fox & Wesley Hartmann & Günter Hitsch & V. Viard & Miguel Villas-Boas & Naufel Vilcassim, 2005. "Recent Advances in Structural Econometric Modeling: Dynamics, Product Positioning and Entry," Marketing Letters, Springer, vol. 16(3), pages 209-224, December.
  7. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
  8. James J. Heckman & Salvador Navarro, 2005. "Dynamic Discrete Choice and Dynamic Treatment Effects," NBER Technical Working Papers 0316, National Bureau of Economic Research, Inc.
  9. repec:ner:tilbur:urn:nbn:nl:ui:12-332636 is not listed on IDEAS
  10. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  11. Magnac & Thesmar, 2002. "Identifying dynamic discrete decision processes," Working Papers 155888, Institut National de la Recherche Agronomique, France.
  12. Grether, David M. & Plott, Charles R., . "Economic Theory of Choice and the Preference Reversal Phenomenon," Working Papers 152, California Institute of Technology, Division of the Humanities and Social Sciences.
  13. Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63 Elsevier.
  14. Chateauneuf, Alain & Eichberger, Jurgen & Grant, Simon, 2007. "Choice under uncertainty with the best and worst in mind: Neo-additive capacities," Journal of Economic Theory, Elsevier, vol. 137(1), pages 538-567, November.
  15. Lam, T.C. & Small, K.A., 2000. "The Value of Time and Reliability: Measurement from a Value Pricing Experiment," Papers 00-02, California Irvine - School of Social Sciences.
  16. van Soest, Arthur & Kapteyn, Arie & Zissimopoulos, Julie, 2007. "Using Stated Preferences Data to Analyze Preferences for Full and Partial Retirement," IZA Discussion Papers 2785, Institute for the Study of Labor (IZA).
  17. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  18. Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, vol. 62(6), pages 1291-1326, November.
  19. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
  20. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2.
  21. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  22. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
  23. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  24. Brownstone, David & Small, Kenneth A., 2005. "Valuing time and reliability: assessing the evidence from road pricing demonstrations," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(4), pages 279-293, May.
  25. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  26. Small, Kenneth A, 1987. "A Discrete Choice Model for Ordered Alternatives," Econometrica, Econometric Society, vol. 55(2), pages 409-24, March.
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