The risk-structure dependence effect:Experimenting with an eye to decision-aiding

Mohammed Abdellaoui and B. Munier

Annals of Operations Research, 1998, vol. 80, issue 0, 237-252

Abstract: In this paper, we aim at obtaining, from an experimental design in decision makingunder risk, richer and more appropriate information for management scientists involved indecision7dash;aiding. We design a method of direct elicitation of individual indifference curvesin the Marschak Machina triangle (i.e., the set of all probability distributions over threefixed outcomes). Our results show that indifference curves clearly take quite different typesof shape according to their location within the triangle, i.e. that preferences under risk fundamentallydepend on the risk-structure (as defined in the paper) faced by the decision maker.Furthermore, the risk-structure dependence effect explains the indecisive results of previousexperimental/econometric studies trying to rank different models according to theirdescriptive power. Copyright Kluwer Academic Publishers 1998

Date: 1998
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DOI: 10.1023/A:1018916031387

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