An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data
Experimental research on decision making under risk has until now always employed choice data in order to evaluate the empirical performance of expected utility and the alternative non-expected utility theories. The present paper performs a similar analysis which relies on pricing data instead of choice data. Since pricing data lead in many cases to a different ordering of lotteries than choices (e.g. the preference reversal phenomenon) our analysis may have fundamental different results than preceding investigations. We elicit three different types of pricing data: willingness-to-pay, willingness-to-accept and certainty equivalents under the Becker-DeGroot-Marschak (BDM) incentive mechanism. One of our main result shows that the comparative performance of the single theories differs significantly under these three types of pricing data.
|Date of creation:||Nov 2005|
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- Andrea Morone, 2005.
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Papers on Strategic Interaction
2005-20, Max Planck Institute of Economics, Strategic Interaction Group.
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- Andrea Morone, 2007. "Comparison of Mean-Variance Theory and Expected-Utility Theory through a Laboratory Experiment," SERIES 0019, Dipartimento di Scienze economiche e metodi matematici - Università di Bari, revised Oct 2007.
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"Noise and Bias in Eliciting Preferences,"
07/04, Department of Economics, University of York.
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