Experiments on Decisions Under Uncertainty: A Theoretical Framework

The analysis of lab data entails a joint test of the underlying theory and of subjects’conjectures regarding the experimental design itself, how subjects frame the experiment. We provide a theoretical framework for analyzing such conjectures. We use experiments of decision making under uncertainty as a case study. Absent restrictions on subjects’framing of the experiment, we show that any behavior is consistent with standard updating ("anything goes"), including that suggestive of anomalies such as over-confidence, excess belief stickiness, etc. When the experimental protocol restricts subjects’conjectures (plausibly, by generating information during the experiment), standard updating has non-trivial testable implications. JEL classification: D01, D80, D83.