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

Schmidt, Ulrich; Seidl, Christian - In: Theory and Decision 77 (2014) 3, pp. 323-339

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/10010959272

A theory of discrete choice with information costs

Cheremukhin, Anton; Popova, Anna; Tutino, Antonella - In: Journal of Economic Behavior & Organization 113 (2015) C, pp. 34-50

We present a theory of discrete choice with information costs that supports deliberate stochastic choice. We use a unique experimental dataset to distinguish between errors arising from limitations on a decision maker's cognitive abilities and conscious disregard of information. Experimental...

Persistent link: https://www.econbiz.de/10011263911

Conditions for quantum interference in cognitive sciences

Jukalov, Vjačeslav I.; Sornette, Didier - 2013

We present a general classification of the conditions under which cognitive science, concerned e.g. with decision making, requires the use of quantum theoretical notions. The analysis is done in the frame of the mathematical approach based on the theory of quantum measurements. We stress that...

Persistent link: https://www.econbiz.de/10009751180

Divergence and the price of uncertainty

Schneider, Paul; Trojani, Fabio - 2015 - This Version: November 23, 2015

Realized divergence gauges the distinct realized moments associated with time-varying uncertainty and is tradeable with divergence swaps engineered from delta-hedged option portfolios. Consistently with established notions of symmetry in arbitrage-free option markets, implied divergence...

Persistent link: https://www.econbiz.de/10011507861

Quantum decision theory in simple risky choices

Favre, Maroussia; Wittwer, Amrei; Heinimann, Hans Rudolf; … - 2016

Quantum decision theory (QDT) is a recently developed theory of decision making based on the mathematics of Hilbert spaces, a framework known in physics for its application to quantum mechanics. This framework formalizes the concept of uncertainty and other effects that are particularly manifest...

Persistent link: https://www.econbiz.de/10011514496

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

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

New Perspectives on Statistical Decisions Under Ambiguity

Stoye, Jörg - In: Annual Review of Economics 4 (2012) 1, pp. 257-282

This review summarizes and connects recent work on the foundations and applications of statistical decision theory. Minimax models of decisions making under ambiguity are identified as a thread running through several literatures. In axiomatic decision theory, these models motivated a large...

Persistent link: https://www.econbiz.de/10010604265

Bootstrap Diagnostics for Irregular Estimators

Andrews, Isaiah; Shapiro, Jesse M. - National Bureau of Economic Research - 2024

Empirical researchers frequently rely on normal approximations in order to summarize and communicate uncertainty about their findings to their scientific audience. When such approximations are unreliable, they can lead the audience to make misguided decisions. We propose to measure the failure...

Persistent link: https://www.econbiz.de/10014468238

Managing the financial risks of electricity producers using options

Pineda, S.; Conejo, A.J. - In: Energy Economics 34 (2012) 6, pp. 2216-2227

Electricity producers participating in electricity markets face risks pertaining to both selling prices and the availability of the production units. Among electricity derivatives, options represent an adequate instrument to manage these risks. In this paper, we propose a multi-stage stochastic...

Persistent link: https://www.econbiz.de/10010588010

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