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Mixture models of choice under risk

Author

Listed:
  • Conte, Anna
  • Hey, John D.
  • Moffatt, Peter G.

Abstract

This paper is concerned with estimating preference functionals for choice under risk from the choice behaviour of individuals. We note that there is heterogeneity in behaviour between individuals and within individuals. By 'heterogeneity between individuals' we mean that people are different, in terms of both their preference functionals and their parameters for these functionals. By 'heterogeneity within individuals' we mean that the behaviour may be different even by the same individual for the same choice problem. We propose methods of taking into account all forms of heterogeneity, concentrating particularly on using a Mixture Model to capture the heterogeneity of preference functionals.

Suggested Citation

  • Conte, Anna & Hey, John D. & Moffatt, Peter G., 2011. "Mixture models of choice under risk," Journal of Econometrics, Elsevier, vol. 162(1), pages 79-88, May.
    • Handle: RePEc:eee:econom:v:162:y:2011:i:1:p:79-88
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    More about this item

    Keywords

    Expected utility theory Maximum simulated likelihood Mixture models Rank dependent expected utility theory Heterogeneity;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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