Kontek, Krzysztof (2015): FanningOut or FanningIn? Continuous or Discontinuous? Estimating Indifference Curves Inside the MarschakMachina Triangle using Certainty Equivalents.
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Abstract
This paper introduces a new method of estimating indifference curves in the MarschakMachina triangle. The method involves posing questions about indifference. Contrary to previous attempts, where subjects were required to identify those lotteries to which they were indifferent visàvis a given lottery, the subjects are here required to determine its certainty equivalent. The procedure is repeated for a large number of lotteries inside the triangle. Simple, linear interpolation of certainty equivalent values between adjacent points representing the lotteries under consideration allows any indifference curve inside the triangle to be plotted. The experimental results presented in the paper shed new light on the shape of indifference curves inside the MarschakMachina triangle, where curve parallelism, fanningout, fanningin and boundary effects, including (possibly discontinuous) jumps, are all common. As shown, those decisionmaking models, which can predict jumps on the triangle legs, offer the best econometric fit of the indifference curves obtained in the study.
Item Type:  MPRA Paper 

Original Title:  FanningOut or FanningIn? Continuous or Discontinuous? Estimating Indifference Curves Inside the MarschakMachina Triangle using Certainty Equivalents. 
Language:  English 
Keywords:  MarschakMachina triangle, indifference curves, fanningout, fanningin, models of decisionmaking under risk, certainty equivalents, Wolfram Mathematica® 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C14  Semiparametric and Nonparametric Methods: 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 > C8  Data Collection and Data Estimation Methodology ; Computer Programs > C88  Other Computer Software 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:  63965 
Depositing User:  Krzysztof Kontek 
Date Deposited:  29 Apr 2015 06:34 
Last Modified:  26 Sep 2019 22:42 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/63965 
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