The explanatory and predictive power of non two-stage-probability theories of decision making under ambiguity
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Representing ambiguity in the laboratory using a Bingo Blower (which is transparent and not manipulable) and asking the subjects a series of allocation questions, we obtain data from which we can estimate by maximum likelihood methods (with explicit assumptions about the errors made by the subjects) a significant subset of particular parameterisations of the empirically relevant models of behaviour under ambiguity, and compare their relative explanatory and predictive abilities. Our results suggest that not all recent models of behaviour represent a major improvement in explanatory and predictive power, particularly the more theoretically sophisticated ones.
KeywordsAlpha model Ambiguity Bingo blower Choquet expected utility Contraction model Rank dependent expected utility Subjective expected utility Vector expected utility
JEL ClassificationsD81 C91
The authors would like to thank the Editor of this journal and a referee for very helpful comments which led to significant improvements in both the analysis of our results and their presentation.
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