Individual behavior under risk and under uncertainty: An experimental study
- 308 Downloads
These experiments are concerned with individual behavior under risk and under uncertainty. By exploiting the ‘isolation effect’ the experiments were able to offer to 134 subjects the possibility of actually gaining or losing an important sum of money.
The experimental data show that under risk as well as under complete ignorance the subjects' attitudes towards prospects of gains and towards prospects of losses are totally unrelated.
The data also show that when facing prospects of gains, the subjects generally take the exact probabilities of the events into account, whereas, when facing prospects of losses many of then have only recourse to coarser categories of plausibility, or even no longer use their information at all.
Unable to display preview. Download preview PDF.
- Allais M., 1952: ‘The foundations of a positive theory of choice involving risk and a criticism of the postulate and axioms of the American School’ (From 1952, French version). In Expected Utility Hypotheses and the Allais Paradox. Allais and Hagen Eds., D. Reidel, Dordrecht, 1979.Google Scholar
- Cohen M. and Jaffray J. Y., 1981: ‘Experimental results on decision making under uncertainty’. Methods of Operations Research Proceedings, 44.Google Scholar
- Cohen M., Jaffray J. Y. and Said T., 1983: ‘Comparaison expérimentale et comportements individuels dans le risque et dans l'incertain pour des gains et pour des pertes’. Bulletin de Mathématiques Economiques, No. 18.Google Scholar
- De Neufville R. and McCord M., 1982: ‘Fundamental deficiency of expected utility decisions analysis’, F.U.R.T. 82.Google Scholar
- Ellsberg D., 1961: ‘Risk, ambiguity and the Savage axioms.’ Quarterly Journal of Economics, 75.Google Scholar
- Fishburn P. C. and Kochenberger G. A., 1980: ‘Two-piece Von Neumann-Morgenstern utility functions.’ Decision Sciences, 10, No. 4.Google Scholar
- Friedman M. and Savage L. J., 1948: ‘The utility analysis of choices involving risk’. Journal of Political Economy, 56.Google Scholar
- Hershey J. and Schoemaker P., 1980: ‘Prospect theory's reflection hypothesis: A critical examination’. Organizational behavior and Human Performances, 25.Google Scholar
- Hershey J., Kunreuther H. and Schoemaker P., 1982: ‘Source of bias in assessment procedures for utility functions’. Management Science, 23, No. 8.Google Scholar
- Hogarth R. and Makridakis S., 1981: ‘Forecasting and planning: An evaluation’. Management Science, 27, No. 2.Google Scholar
- Kahneman D. and Tversky A., 1979: ‘Prospect Theory: an analysis of decision under risk’. Econometrica, 47, No. 2.Google Scholar
- Karmarkar U. S., 1978: ‘Subjectively weighted utility: a descriptive extension of the expected utility model’. Organizational Behavior and Human Performances, 21.Google Scholar
- Kunreuther H., 1976: ‘Limited knowledge and insurance protection’. Public Policy, 24, No. 2.Google Scholar
- Luce R. D. and Raīffa H., 1957: Games and Decisions, Wiley, New York.Google Scholar
- MacCrimmon K. R. and Larsson S., 1979: ‘Utility theory: axioms versus “Paradoxes”.’ In: Expected Utility Hypotheses and the Allais Paradox. M. Allais and D. Hagen Eds. D. Reidel, Dordrecht.Google Scholar
- Markowitz H. 1952: ‘The utility of wealth’. Journal of Political Economy, 60, No. 2.Google Scholar
- Savage L. J., 1954: The Foundations of Statistics. Wiley, New York.Google Scholar
- Schoemaker P. J., 1980: Experiments on Decisions Under Risk: The Expected Utility Hypothesis. Martinus Nijhoff Publishing, Boston.Google Scholar
- Slovic, P., 1969: ‘Differential effects of real versus hypothetical payoffs on choices among gambles’. Journal of Experimental Psychology, 79.Google Scholar
- Wald A., 1971: Statistical Decision Functions. Chelsea Publishing Company, Bronx, New York.Google Scholar
- Yaari M. E., 1965: ‘Convexity in the theory of choice under risk’. Quarterly Journal of Economics, 79.Google Scholar