Applications of Choquet expected utility to hypothesis testing with incompleteness

Hiroaki Kaido and Yi Zhang ()
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Yi Zhang: Jinan University

The Japanese Economic Review, 2023, vol. 74, issue 4, No 6, 572 pages

Abstract: Abstract The Maximin and Choquet expected utility theories guide decision-making under ambiguity. We apply them to hypothesis testing in incomplete models. We consider a statistical risk function that uses a prior probability to incorporate parameter uncertainty and a belief function to reflect the decision-maker’s willingness to be robust against the model’s incompleteness. We develop a numerical method to implement a test that minimizes the risk function. We also use a sequence of such tests to approximate a minimax optimal test when a nuisance parameter is present under the null hypothesis.

Keywords: Statistical decision theory; Choquet expected utility; Incomplete models; Sharp identifying restrictions; Minimax tests (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s42973-023-00146-1

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