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Reconsidering the common ratio effect : the roles of compound independence, reduction, and coalescing

Schmidt, Ulrich; Seidl, Christian - 2014

Common ratio effects should be ruled out if subjects' preferences satisfy compound independence, reduction of compound … lotteries, and coalescing. In other words, at least one of these axioms should be violated in order to generate a common ratio … observation of common ratio effects.We observe that compound independence and reduction of compound lotteries hold, whereas …

Persistent link: https://www.econbiz.de/10010367224

Reconsidering the common ratio effect : the roles of compound independence, reduction, and coalescing

Schmidt, Ulrich; Seidl, Christian - In: Theory and decision : an international journal for … 77 (2014) 3, pp. 323-339

Persistent link: https://www.econbiz.de/10010481151

Upper and lower bounds for expected utility

LiCalzi, Marco - In: Economic Theory 16 (2000) 2, pp. 489-502

The decision-theoretic literature has developed very few techniques to bound the expected utility of a random variable when only simple statistics like its median or mode or mean are known. One reason for this lack of results is that we are missing a convenient way to link probability theory and...

Persistent link: https://www.econbiz.de/10005244915

Confidence Theory : Belief Formation in Choice Under Risk

Milovanović, Goran - 2014

In confidence theory, the decision maker relies on statistical regularities from the economic environment to adopt prior beliefs about the probabilities stated on a lottery. Following the confidence principle, by which the weight of the prior in Bayesian inference is proportional to the...

Persistent link: https://www.econbiz.de/10013061467

The Source of Uncertainty in Probabilistic Preferences Over Gambles

Charles-Cadogan, G. - 2012

Probabilistic preference models predict that a subject makes different choices with different probabilities in repeatedly experiments with the same stimuli. This paper explains why. First, we prove that a gamble is a statistical ensemble or sample function of a random field with canonical...

Persistent link: https://www.econbiz.de/10013113294

Calibration of quantum decision theory, aversion to large losses and predictability of probabilistic choices

Vincent, Sabine; Jukalov, Vjačeslav I.; Kovalenko, Tatyana - 2016

We present the first calibration of quantum decision theory (QDT) to an empirical data set. The data comprise 91 choices between two lotteries (two "prospects") presented in 91 random pairs made by 142 subjects offered at two separated times. First, we quantitatively account for the fraction of...

Persistent link: https://www.econbiz.de/10011516615

Stochastic representation decision theory : how probabilities and values are entangled dual characteristics in cognitive processes

Ferro, Giuseppe M.; Sornette, Didier - 2020

Humans are notoriously bad at understanding probabilities, exhibiting a host of biases and distortions that are context dependent. This has serious consequences on how we assess risks and make decisions. Several theories have been developed to replace the normative rational expectation theory at...

Persistent link: https://www.econbiz.de/10012219210

Estimation and comparison between rank-dependent expected utility, cumulative prospect theory and quantum decision theory

Ferro, Giuseppe; Kovalenko, Tatyana; Sornette, Didier - 2021

We propose a new parametrization of Quantum Decision Theory (QDT), based on Rank Dependent Utility Theory (RDU). Using experimental data made of choices between pairs of lotteries, we compare QDT with "classical" decision theories, RDU and Cumulative Prospect Theory (CPT). At the aggregate...

Persistent link: https://www.econbiz.de/10012612940

Investors' behavior in alternative asset classes

Papavasiliou, Ellie; Topaloglou, Nikolas; Tsomidis, Georgios - In: Spoudai : journal of economics and business 72 (2022) 3/4, pp. 3-55

We investigate whether alternative asset classes should be included in optimal portfolios of the most prominent investor personae in the Behavioral Finance literature, namely, the Cumulative Prospect Theory, the Markowitz and the Loss Averse types of investors. We develop a stochastic spanning...

Persistent link: https://www.econbiz.de/10014246136

Why Income Comparison is Rational

Wolpert, David - 2009

In many cultures a major factor affecting a person's happiness is the difference between their income and that of their neighbors, independent of their own income. This effect is strongest when the income difference is negative (richer neighbor). In addition, across their lifetime, a person's...

Persistent link: https://www.econbiz.de/10014211585