IDEAS home Printed from https://ideas.repec.org/p/nbr/nberte/0081.html
   My bibliography  Save this paper

The Influence Of Probability on Risky Choice: A parametric Examination

Author

Listed:
  • Pamela K. Lattimore
  • Joanna R. Baker
  • A. Dryden Witte

Abstract

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

Suggested Citation

  • Pamela K. Lattimore & Joanna R. Baker & A. Dryden Witte, 1992. "The Influence Of Probability on Risky Choice: A parametric Examination," NBER Technical Working Papers 0081, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberte:0081
    Note: LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/t0081.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    2. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-154, Summer.
    3. Segal, Uzi, 1987. "Some remarks on Quiggin's anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 145-154, March.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.