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Journal of Risk and Uncertainty

, Volume 49, Issue 1, pp 1–29 | Cite as

The explanatory and predictive power of non two-stage-probability theories of decision making under ambiguity

  • John D. Hey
  • Noemi Pace
Article

Abstract

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.

Keywords

Alpha model Ambiguity Bingo blower Choquet expected utility Contraction model Rank dependent expected utility Subjective expected utility Vector expected utility 

JEL Classifications

D81 C91 

Notes

Acknowledgments

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.

Supplementary material

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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Department of Economics and Related StudiesUniversity of YorkYorkUK
  2. 2.Department of EconomicsUniversy Ca’ Foscari of VeniceVeneziaItaly

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