An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data

Andrea Morone and Ulrich Schmidt

Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: Experimental research on decision making under risk has until now always employed choice data in order to evaluate the empirical performance of expected utility and the alternative non-expected utility theories. The present paper performs a similar analysis which relies on pricing data instead of choice data. Since pricing data lead in many cases to a different ordering of lotteries than choices (e.g. the preference reversal phenomenon) our analysis may have fundamental different results than preceding investigations. We elicit three different types of pricing data: willingness-to-pay, willingness-to-accept and certainty equivalents under the Becker-DeGroot-Marschak (BDM) incentive mechanism. One of our main result shows that the comparative performance of the single theories differs significantly under these three types of pricing data.

Keywords: expected utility; non-expected utility; experiments; WTP; WTA; BDM (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2005-11
New Economics Papers: this item is included in nep-dcm, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data (2008)
Working Paper: An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data (2006)
Working Paper: An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data (2003)
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