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Forbidden zones and biases for the expectation of a random variable. Version 2

Alexander Harin

MPRA Paper from University Library of Munich, Germany

Abstract: A forbidden zones theorem is proven in the present article. If some non-zero lower bound exists for the variance of a random variable, whose support is located in a finite interval, then non-zero bounds or forbidden zones exist for its expectation near the boundaries of the interval. The article is motivated by the need of a theoretical support for the practical analysis of the influence of a noise that was performed for the purposes of behavioral economics, utility and prospect theories, decision and social sciences and psychology. The four main contributions of the present article are: the mathematical support, approach and model those are developed for this analysis and the successful uniform applications of the model in more than one domain. In particular, the approach supposes that subjects decide as if there were some biases of the expectations. Possible general consequences and applications of the theorem for a noise and biases of measurement data are preliminary considered.

Keywords: probability; variance; noise; bias; utility theory; prospect theory; behavioral economics; decision sciences; measurement (search for similar items in EconPapers)
JEL-codes: C02 C1 D8 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-upt
Date: 2018-03-30
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