Testing for independence while allowing for probabilistic choice
Graham Loomes () and
Ganna Pogrebna ()
Journal of Risk and Uncertainty, 2014, vol. 49, issue 3, 189-211
We propose a broad framework for individual choice under risk which can accommodate many stochastic formulations of various deterministic theories. Using this framework to guide an experimental design, we show that most individuals’ departures from the independence axiom cannot be explained by adding a ‘random noise’ term to a deterministic ‘core’ theory which incorporates this axiom. We also find behaviour that cannot be explained in terms of the standard assumptions of Cumulative Prospect Theory, often invoked to account for violations of independence. Our results suggest that ‘similarity’ effects may explain the data better. Copyright The Author(s) 2014
Keywords: Independence axiom; Stochastic choice; Expected utility theory; Prospect theory; C81; C91; D81 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:kap:jrisku:v:49:y:2014:i:3:p:189-211
Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11166/PS2
Access Statistics for this article
Journal of Risk and Uncertainty is currently edited by W. Kip Viscusi
More articles in Journal of Risk and Uncertainty from Springer
Series data maintained by Sonal Shukla ().