Which Decision Theory?
نویسنده
چکیده
A new laboratory experiment is designed to identify the best theories for describing decisions under risk. The experimental design has two noteworthy features: a representative sample of binary choice problems (for fair comparison across theories) and a lottery set with a small number of outcomes and probabilities (for ease of non-parametric estimation). We find that a simple heuristic, rank-dependent utility and expected utility theory provide the best goodness of fit. Each theory can account for about a quarter of individual choice patterns. Most of choice patterns best rationalized by expected utility theory can be equally well described by Yaari's dual model. Some of choice patterns best rationalized by rank-dependent utility can be equally well described by modified mean-variance approach.
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