Invariant behaviour in decision making under risk and uncertainty

[g charles-cadogan]

Dear All:

Earlier this year I asked the forum for references on group theory applications to decision making under risk and uncertainty over and above the additive groups. Based on the response, and my own inquiry, it appears that not much has been done in that genre. A qualitative paper by Simon, H. (1990), "Invariant Human Behavior," Ann. Rev. Psychol. 41, 1–19 provides some motivation for group theoretic examination of behaviour. Nonetheless, I took a stab at it in the [hyperlinked] paper   Group Representations for Decision Making Under Risk and Uncertainty  which contains the references that I could find . One of  the main results in the paper is detailed construction of a matrix operator that transforms skewed S-shaped value functions into inverse S-shaped probability weighting functions (depicted in the attached) by imposing suitable identifying restrictions on the operator. In that way, we can derive a "normative" probability weighting function from a value function and vice versa. If there are any related [or tangentially related] references that I may have missed, please let me know. Of course, comments are welcome.

[Peter Wakker]

Dear all,

 

Attached is an experimental paper on using prospect theory to predict choice under ambiguity.  We use the new technology and the valuable data set of

 

Hey, John D., Gianna Lotito, & Anna Maffioletti (2010) “The Descriptive and Predictive Adequacy of Theories of Decision Making under Uncertainty/Ambiguity,” Journal of Risk and Uncertainty 41, 81–111

 

(it uses the bingo blower), which they kindly shared with us, to calibrate the source method of Abdellaoui et al. (2011, AER).  We find that it performs better than other ambiguity theories.  We hope that new ambiguity theories will also use the HLM data set to calibrate their predictive power.

 

 

Best regards, Peter

 

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