EconPapers    
Economics at your fingertips  
 

A generalized probability framework to model economic agents' decisions under uncertainty

Emmanuel Haven and Sandro Sozzo

International Review of Financial Analysis, 2016, vol. 47, issue C, 297-303

Abstract: The applications of techniques from statistical (and classical) mechanics to model interesting problems in economics and finance have produced valuable results. The principal movement which has steered this research direction is known under the name of ‘econophysics’. In this paper, we illustrate and advance some of the findings that have been obtained by applying the mathematical formalism of quantum mechanics to model human decision making under ‘uncertainty’ in behavioral economics and finance. Starting from Ellsberg's seminal article, decision making situations have been experimentally verified where the application of Kolmogorovian probability in the formulation of expected utility is problematic. Those probability measures which by necessity must situate themselves in Hilbert space (such as ‘quantum probability’) enable a faithful representation of experimental data. We thus provide an explanation for the effectiveness of the mathematical framework of quantum mechanics in the modeling of human decision making. We want to be explicit though that we are not claiming that decision making has microscopic quantum mechanical features.

Keywords: Econophysics; Expected utility theory; Ellsberg paradox; Quantum mathematics (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521915002124
Full text for ScienceDirect subscribers only

Related works:
Working Paper: A Generalized Probability Framework to Model Economic Agents' Decisions Under Uncertainty (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:finana:v:47:y:2016:i:c:p:297-303

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Series data maintained by Dana Niculescu ().

 
Page updated 2017-06-29
Handle: RePEc:eee:finana:v:47:y:2016:i:c:p:297-303