Is Choice the Correct Primitive? On Using Certainty Equivalents and Reference Levels to Predict Choices Among Gambles
نویسندگان
چکیده
Choice is viewed as a derived, not a primitive, concept. Individual gambles are assigned subjective certainty equivalents (CE1); the choice set X has an associated reference level [RL(X)] based on the CEls of its members; the outcomes of each gamble are recoded as deviations from the RL(X); and new CEes are constructed. The gamble having the largest CE2 is chosen. The CEs are described by the rankand sign-dependent theory of Luce (1992b). The concept of RL is studied axiomatically. The model predicts many behavioral anomalies and is tested with data sets of Mellers, Chang, Birnbaum, and Ord6fiez (1992).
منابع مشابه
Violations of Monotonicity and Contextual Effects in Choice-based Certainty Equivalents
This article investigates choices between gambles and amounts of money to explore two issues in decision making First, in recent studies, judgments of the values of gambles violated monotontcity (dominance), yet choices between the same gambles satisfied monotonicity, producing reversals of preference This experiment tested whether certainty equivalents based on choices between gambles and mone...
متن کاملTests of Assumptions About the Joint Receipt of Gambles in Rank- and Sign-Dependent Utility Theory
A rankand sign-dependent utility theory is based on an operation of joint receipt of 2 independent gambles and 3 assumptions regarding the operation (R. D. Luce, 1992). The authors tested these 3 assumptions—segregation, duplex decomposition, and the additivity of certainty equivalents over joint receipt—using both judged and choice certainty equivalents (CEs). Median choice CEs provided suppor...
متن کاملExploring the reference point in prospect theory: gambles for length of life.
Attitude toward risk is an important factor determining patient preferences. Risk behavior has been shown to be strongly dependent on the perception of the outcome as either a gain or a loss. According to prospect theory, the reference point determines how an outcome is perceived. However, no theory on the location of the reference point exists, and for the health domain, there is no direct evi...
متن کاملSex differences and statistical stereotyping in attitudes toward financial risk
Subjects in a laboratory experiment completed the Zuckerman Sensation-Seeking Scale (SSS) then chose among five alternative gambles with substantial financial stakes. The gambles differed in expected return and variance. Gambles were presented in one of two different frames in a betweensubjects design. In one, subjects were paid a fixed sum for completing the survey and that sum was then at ris...
متن کاملRisk premiums and certainty equivalents of loss-averse newsvendors of bounded utility
Loss-averse behavior makes the newsvendors avoid the losses more than seeking the probable gains as the losses have more psychological impact on the newsvendor than the gains. In economics and decision theory, the classical newsvendor models treat losses and gains equally likely, by disregarding the expected utility when the newsvendor is loss-averse. Moreover, the use of unbounded utility to m...
متن کامل