The Descriptive and Predictive Adequacy of Theories of Decision Making Under Uncertainty/Ambiguity

John Hey, Gianna Lotito and Anna Maffioletti

Discussion Papers from Department of Economics, University of York

Abstract: In this paper we examine the performance of theories of decision making under uncertainty/ambiguity from the perspective of their descriptive and predictive power, taking into account the relative parsimony of the various theories. To this end, we employ an innovative experimental design which enables us to reproduce ambiguity in the laboratory in a transparent and non-probabilistic way. We find that judging theories on the basis of their theoretical appeal, or on their ability to do well in testing contexts, is not the same as judging them on the basis of their explanatory and predictive power. We also find that the more elegant theoretical models do not perform as well as simple rules of thumb.

Keywords: Ambiguity; Bingo Blower; Choquet Expected Utility; Decision Field Theory; Decision Making; Expected Utility; Hurwicz Criterion; (Gilboa and Schmeidler) MaxMin EU; (Gilboa and Schmeidler) MaxMax EU; (Ghirardato) Alpha-Model; MaxMin; MaxMax; Minimum Regret; Prospect Theory; Uncertainty. (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2008-04
New Economics Papers: this item is included in nep-cba, nep-cbe, nep-evo, nep-exp, nep-hpe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Chapter: The descriptive and predictive adequacy of theories of decision making under uncertainty/ambiguity (2018)
Journal Article: The descriptive and predictive adequacy of theories of decision making under uncertainty/ambiguity (2010)
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