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Choquet OK?

Author

Listed:
  • John D Hey
  • Gianna Lotito
  • Anna Maffioletti

Abstract

There is a large theoretical literature in both economics and psychology on decision making under ambiguity (as distinct from risk) and many preference functionals proposed in this literature for describing behaviour in such contexts. However, the empirical literature is scarce and largely confined to testing between various proposed functionals. Using a new design, in which we create genuine ambiguity in the laboratory and can control the amount of ambiguity, we generate data which enables us to estimate several of the proposed preference functionals. In particular, we fit Subjective Expected Utility, Prospect Theory, Choquet Expected Utility, Maximin, Maximax, and Minimum Regret preference functionals, and examine how the fit changes when we vary the ambiguity. We find that the Choquet formulation performs best overall, though it is clear that different decision makers have different functionals. We also identify new decision rules which are not explicitly modelled in the literature.

Suggested Citation

  • John D Hey & Gianna Lotito & Anna Maffioletti, 2007. "Choquet OK?," Discussion Papers 07/12, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:07/12
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    Cited by:

    1. Olivier L’Haridon & Lætitia Placido, 2010. "Betting on Machina’s reflection example: an experiment on ambiguity," Theory and Decision, Springer, vol. 69(3), pages 375-393, September.
    2. Enrica Carbone & Gerardo Infante, 2014. "Comparing behavior under risk and under ambiguity in a lifecycle experiment," Theory and Decision, Springer, vol. 77(3), pages 313-322, October.

    More about this item

    Keywords

    Ambiguity; Subjective Expected Utility; Prospect Theory; Choquet Expected Utility; Decision Making; Maximin; Maximax; Minimum Regret; Bingo Blower;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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