The Influence Of Probability on Risky Choice: A parametric Examination
The appeal of expected utility theory as a basis for a descriptive model of risky decision making has diminished is a result of empirical evidence which suggests that individuals do not behave in a manner consistent with the prescriptive tenets of EUT. In this paper, we explore the influence of probability on risky choice. by proposing and estimating a parametric model of risky decision making. Our results suggest that models which provide for probability transformations are most appropriate for the majority of subjects. Further. we find that the transformation differs for most subjects depending upon whether the risky outcomes are gains or losses. Most subjects are considerably less sensitive to changes in mid-range probability than is proposed by the expected utility model and risk-seeking behavior over "long-shot" odds is common
|Date of creation:||Aug 1992|
|Date of revision:|
|Publication status:||published as Journal of Economic Behavior and Organization, Vol. 17, pp. 377-400, (1992)|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Quiggin, John, 1987. "Decision weights in anticipated utility theory : Response to Segal," Journal of Economic Behavior & Organization, Elsevier, vol. 8(4), pages 641-645, December.
- Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
- Uzi Segal, 1986.
"Some Remarks on Quiggin's Anticipated Utility,"
UCLA Economics Working Papers
392, UCLA Department of Economics.
- Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-54, Summer.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberte:0081. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.