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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2006-08




Andrea Morone, Ulrich Schmidt




An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data
Abstract Experimental research on decision making under risk has until now always employed choice data in order to evaluate the empirical performance of expected utility and the alternative non-expected utility theories. The present paper performs a similar analysis which relies on pricing data instead of choice data. Since pricing data lead in many cases to a different ordering of lotteries than choices (e.g. the preference reversal phenomenon) our analysis may have fundamental different results than preceding investigations. We elicit three different types of pricing data: willingness-to-pay, willingness-to-accept and certainty equivalents under the Becker-DeGroot-Marschak (BDM) incentive mechanism. One of our main result shows that the comparative performance of the single theories differs significantly under these three types of pricing data.

Keywords: expected utility, non-expected utility, experiments, WTP, WTA, BDM

JEL classification: C91, D81




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