Drichoutis, Andreas and Lusk, Jayson (2012): Judging statistical models of individual decision making under risk using in and outofsample criteria.
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Abstract
Despite the fact that conceptual models of individual decision making under risk are deterministic, attempts to econometrically estimate risk preferences require some assumption about the stochastic nature of choice. Unfortunately, the consequences of making different assumptions are, at present, unclear. In this paper, we compare two popular error specifications (Luce vs. Fechner), with and without accounting for contextual utility, for two different conceptual models (expected utility and rankdependent expected utility) using in and outofsample selection criteria. We find drastically different inferences about structural risk preferences across the competing specifications. Overall, a mixture model combining the two conceptual models assuming Fechner error and contextual utility provides the best fit of the data both in and outofsample.
Item Type:  MPRA Paper 

Original Title:  Judging statistical models of individual decision making under risk using in and outofsample criteria 
Language:  English 
Keywords:  error specification; expected utility theory; experiment; probability weighting; rank dependent utility; risk 
Subjects:  D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D81  Criteria for DecisionMaking under Risk and Uncertainty C  Mathematical and Quantitative Methods > C2  Single Equation Models; Single Variables > C25  Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions C  Mathematical and Quantitative Methods > C9  Design of Experiments > C91  Laboratory, Individual Behavior 
Item ID:  42019 
Depositing User:  Andreas Drichoutis 
Date Deposited:  17. Oct 2012 19:55 
Last Modified:  12. Feb 2013 20:01 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/42019 
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Judging statistical models of individual decision making under risk using in and outofsample criteria. (deposited 22. May 2012 15:59)

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Judging statistical models of individual decision making under risk using in and outofsample criteria. (deposited 23. May 2012 14:09)