Marketing Letters

, Volume 19, Issue 3, pp 269–285

Risk, uncertainty and discrete choice models

  • Andre de Palma
  • Moshe Ben-Akiva
  • David Brownstone
  • Charles Holt
  • Thierry Magnac
  • Daniel McFadden
  • Peter Moffatt
  • Nathalie Picard
  • Kenneth Train
  • Peter Wakker
  • Joan Walker
Article

DOI: 10.1007/s11002-008-9047-0

Cite this article as:
de Palma, A., Ben-Akiva, M., Brownstone, D. et al. Mark Lett (2008) 19: 269. doi:10.1007/s11002-008-9047-0

Abstract

This paper examines the cross-fertilizations of random utility models with the study of decision making under risk and uncertainty. We start with a description of the expected utility (EU) theory and then consider deviations from the standard EU frameworks, involving the Allais paradox and the Ellsberg paradox, inter alia. We then discuss how the resulting non-EU framework can be modeled and estimated within the framework of discrete choices in static and dynamic contexts. Our objectives in addressing risk and ambiguity in individual choice contexts are to understand the decision choice process and to use behavioral information for prediction, prescription, and policy analysis.

Keywords

Discrete choice Decision making Risk Uncertainty (Cumulative) prospect theory Ambiguity 

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  • Andre de Palma
    • 1
  • Moshe Ben-Akiva
    • 2
  • David Brownstone
    • 3
  • Charles Holt
    • 4
  • Thierry Magnac
    • 5
  • Daniel McFadden
    • 6
  • Peter Moffatt
    • 7
  • Nathalie Picard
    • 1
  • Kenneth Train
    • 6
  • Peter Wakker
    • 8
  • Joan Walker
    • 9
  1. 1.Université de Cergy-PontoiseCergy-Pontoise CedexFrance
  2. 2.Massachusetts Institute of TechnologyCambridgeUSA
  3. 3.University of California at IrvineIrvineUSA
  4. 4.University of VirginiaCharlottesvilleUSA
  5. 5.Toulouse School of EconomicsToulouse Cedex 9France
  6. 6.University of CaliforniaBerkeleyUSA
  7. 7.University of East AngliaNorwichUK
  8. 8.Erasmus UniversityRotterdamThe Netherlands
  9. 9.Boston UniversityBostonUSA