Stochastic Dominance and Decision Weights: Theory and Experiments
نویسندگان
چکیده
Based on recent theoretical and empirical results about the significance of Cumulative Prospect Theory (CPT), we define RWcSD, an extended notion of stochastic dominance that accounts for both the reflection effect (R) and the probability weighting (Wc). A second definition of stochastic dominance (R∗W -SD) for preferences with reverse reflection effect (R*) as in Markowitz (1952) is presented. Using these definitions, we empirically discriminate between two competing explanations of behavior under risk, namely, CPT and Markowitz. Our experiments reject the reverse reflection effect recently advocated by Levy and Levy (2002a) and offer insight into the relevance of the weighting function in empirical research on choice under risk.
منابع مشابه
The Paradoxes of Allais, Stochastic Dominance, and Decision Weights
Festschrift Volume honoring Ward Edwards, scheduled for publication in 1998. The chapter was published in 1999 and should be cited as follows: Birnbaum (1999). The paradoxes of Allais, stochastic dominance, and decision weights. In J. C. Shanteau, B. A. Mellers, & D. Schum (Eds.), Decision Science and Technology: Reflections on the contributions of Ward Edwards. Boston, MA: Kluwer Academic Publ...
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