Measuring natural source dependence

Cédric Gutierrez () and Emmanuel Kemel ()
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Cédric Gutierrez: Department of Management and Technology and ICRIOS, Bocconi University
Emmanuel Kemel: GREGHEC, CNRS & HEC Paris

Experimental Economics, 2024, vol. 27, issue 2, No 5, 379-416

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10683-024-09822-4

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