Measuring natural source dependence

Cédric Gutierrez () and Emmanuel Kemel ()
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Cédric Gutierrez: Bocconi University [Milan, Italy]
Emmanuel Kemel: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: The consequences of most economic decisions are uncertain; they are conditional on events with unknown probabilities that decision makers evaluate based on their beliefs. In addition to consequences and beliefs, the context that generates events-the source of uncertainty-can also impact preferences, a pattern called source dependence. Despite its importance, there is currently no definition of source dependence that allows for comparisons across individuals and sources. This paper presents a tractable definition of source dependence by introducing a function that matches the subjective probabilities of events generated by two sources. It also presents methods for estimating such functions from a limited number of observations that are compatible with commonly-used choice-based approaches for separating attitudes from beliefs. As an illustration, we implement these methods on three datasets, including two original experiments, and show that they consistently capture clear, albeit heterogeneous, patterns of source dependence between natural sources. Our approach provides a framework for future research to explore how source dependence varies across individuals and situations.

Keywords: Decision under uncertainty ambiguity aversion sources of uncertainty subjective beliefs source dependence familiarity bias. JEL Classification: D81 DD91 C91; Decision under uncertainty; ambiguity aversion; sources of uncertainty; subjective beliefs; source dependence; familiarity bias. JEL Classification: D81; DD91; C91 (search for similar items in EconPapers)
Date: 2024-05-23
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
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Published in Experimental Economics, 2024, 27 (2), pp.379-416. ⟨10.1007/s10683-024-09822-4⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04866878

DOI: 10.1007/s10683-024-09822-4

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