A Note on an Alternative Approach to Experimental Design of Lottery Prospects

Balcombe, Kelvin and Fraser, Iain (2024): A Note on an Alternative Approach to Experimental Design of Lottery Prospects.

Abstract

e introduce an alternative approach to lottery prospects experimental design aimed at collecting experimental data for parametric estimation of the cumulative form of Prospect Theory (PT). Our approach incorporates two fundamental principles: ensuring that all tasks provide valuable information and avoiding redundancy among tasks. These principles mean that we avoid the construction of lottery prospects that duplicate information within the set of tasks generated. The methodological approach that we have designed ensures that each lottery pair is non-redundant in an informational sense. This means that the set of lottery tasks generated can help to improve the effectiveness of data collection when estimation of preference parameters is the main research objective. In this note, we describe our approach to experimental design in detail.

• Item Type: MPRA Paper
• Language: English
• Keywords: Experimental Design; Lotteries; Risk and Uncertainty; Prospect Theory.
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C90 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty

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