Harin, Alexander (2014): Is data interpretation in utility and prospect theories unquestionably correct?

PDF
MPRA_paper_53880.pdf Download (628kB)  Preview 
Abstract
This is a very draft version of the report "The randomlottery incentive system. Can p~1 experiments deductions be correct?". It is published to extend the abstract of the report. Aczél and Luce emphasized a fundamental question: whether W(1)=1 (whether the Prelec weighting function equals 1 at p=1). A purely mathematical theorem proves W(1)<1. Because of this evident "certainuncertain" inconsistency, the deductions from the randomlottery incentive experiments, those include the certain outcomes, cannot be unquestionably correct.
Item Type:  MPRA Paper 

Original Title:  Is data interpretation in utility and prospect theories unquestionably correct? 
Language:  English 
Keywords:  utility; prospect theory; randomlottery incentive system; Prelec weighting function; experiments; 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General C  Mathematical and Quantitative Methods > C8  Data Collection and Data Estimation Methodology ; Computer Programs > C81  Methodology for Collecting, Estimating, and Organizing Microeconomic Data ; Data Access C  Mathematical and Quantitative Methods > C9  Design of Experiments C  Mathematical and Quantitative Methods > C9  Design of Experiments > C91  Laboratory, Individual Behavior D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D81  Criteria for DecisionMaking under Risk and Uncertainty 
Item ID:  53880 
Depositing User:  Alexander Harin 
Date Deposited:  22 Feb 2014 16:19 
Last Modified:  05 Oct 2019 04:51 
References:  [1] Bernoulli D. (1738), "Specimen Theoriae Novae de Mensura Sortis", Commentarii Academiae Scientiarum Imperialis Petropolitanae, 5 (1738): 175192. English translation: "Exposition of a New Theory on the Measurement of Risk", Econometrica, 22(1): 2336. [2] Allais, M. (1953), "Le comportement de l'homme rationnel devant le risque: Critique le postulats et axioms de L'École Américaine", Econometrica, 21: 503546. [3] Ellsberg L. (1961), "Risk, Ambiguity, and the Savage Axioms", The Quarterly Journal of Economics, 75 (4): 643669. [4] Tversky, A. and Wakker, P. (1995) "Risk attitudes and decision weights", Econometrica, 63: 12551280. [5] Kahneman, D. and Thaler, R. (2006) "Anomalies: Utility Maximization and Experienced Utility", Journal of Economic Perspectives, 20, #1: 221234. [6] Schoemaker, P., and Hershey J. (1992), "Utility measurement: Signal, noise, and bias", Organizational Behavior and Human Decision Processes, 1992, vol. 52 (3): 397424. [7] Hey, J., and Orme C. (1994), "Investigating Generalizations of Expected Utility Theory Using Experimental Data", Econometrica, 62 (6): 12911326. [8] Butler, D. J., and Loomes G. C. (2007), "Imprecision as an Account of the Preference Reversal Phenomenon", American Economic Review, 97 (1): 277297. [9] Aczél, J. and Luce R. D. (2007), "A behavioral condition for Prelec’s weighting function on the positive line without assuming W(1)=1", Journal of Mathematical Psychology, Volume 51, Issue 2, April 2007, Pages 126–129. [10] Harin, A. (2004) "Arrangement infringement possibility approach: some economic features of largescale events" Research Announcements, Economics Bulletin, 2004, vol. 28, issue 11, pages A0. [11] Harin А. (2010), "РАЗРЫВЫ В ШКАЛЕ ВЕРОЯТНОСТЕЙ. ИХ ПРОЯВЛЕНИЯ В ЭКОНОМИКЕ И ПРОГНОЗИРОВАНИИ", EconStor Open Access Articles, 2010. [12] Harin А. (2011), "ТЕОРЕМЫ О СУЩЕСТВОВАНИИ РАЗРЫВОВ НА ЧИСЛОВЫХ ОТРЕЗКАХ И В ШКАЛЕ ВЕРОЯТНОСТЕЙ И НЕКОТОРЫЕ ВОЗМОЖНОСТИ ИХ ПРИМЕНЕНИЯ", EconStor Open Access Articles, 2011. [13] Harin А. (2012), "Data Dispersion in Economics (I)  Possibility of Restrictions", Review of Economics & Finance, 2(3): 5970. [14] Harin А. (2012), "Data Dispersion in Economics(II) Inevitability and Consequences of Restrictions", Review of Economics & Finance, 2(4): 2436. [15] Harin, A. (2005) "A Rational Irrational Man" Public Economics from Economics Working Paper Archive at WUSTL, 0511005, 2005. [16] Harin, A. (2007) "Principle of uncertain future and utility" MPRA Paper from University Library of Munich, Germany, 2007. [17] Harin, A. (2008) "Solution of the Ellsberg paradox by means of the principle of uncertain future" MPRA Paper from University Library of Munich, Germany, 8168, 2008. [18] Harin, A. (2009) "General correcting formula of forecasting?" MPRA Paper from University Library of Munich, Germany, 15746, 2009. [19] Cappelen, Alexander W., James Konow, Erik Ø. Sørensen, and Bertil Tungodden. 2013. "Just Luck: An Experimental Study of RiskTaking and Fairness." American Economic Review, 103(4): 13981413. [20] Andreoni, James, and Charles Sprenger. 2012. "Risk Preferences Are Not Time Preferences." American Economic Review, 102(7): 335776. [21] Peter P. Wakker, January, 2007, "Message to referees who want to embark on yet another discussion of the randomlottery incentive system for individual choice", http://people.few.eur.nl/wakker/miscella/debates/randomlinc.htm [22] Harin, A. (2013) "Data dispersion near the boundaries: can it partially explain the problems of decision and utility theories?" Working Papers from HAL, 00851022, 2013. [23] Harin А. (2010), "Theorem of existence of ruptures in the probability scale", 9th International conference "Financial and Actuarial Mathematics and Eventoconverging Technologies", (2010). [24] Harin А. (2010), "Theorem of existence of ruptures in probability scale. Preliminary short version", MPRA Paper from University Library of Munich, Germany, 23319, (2010). [25] Harin, A. (2009) "Ruptures in the probability scale? Calculation of ruptures’ dimensions" MPRA Paper from University Library of Munich, Germany, 19348, 2009. 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/53880 