Prospect relativity: How choice options influence decision under risk

In many theories of decision under risk (e.g., expected utility theory, rank-dependent utility theory, and prospect theory), the utility of a prospect is independent of other options in the choice set. The experiments presented here show a large effect of the available options, suggesting instead that prospects are valued relative to one another. The judged certainty equivalent for a prospect is strongly influenced by the options available. Similarly, the selection of a preferred prospect is strongly influenced by the prospects available, Alternative theories of decision under risk (e.g., the stochastic difference model, multialternative decision field theory, and range frequency theory), where prospects are valued relative to one another, can provide an account of these context effects

Is the mind Bayesian? The case for agnosticism

This paper aims to make explicit the methodological conditions that should be satisfied for the Bayesian model to be used as a normative model of human probability judgment. After noticing the lack of a clear definition of Bayesianism in the psychological literature and the lack of justification for using it, a classic definition of subjective Bayesianism is recalled, based on the following three criteria: An epistemic criterion, a static coherence criterion and a dynamic coherence criterion. Then it is shown that the adoption of this framework has two kinds of implications. The first one regards the methodology of the experimental study of probability judgment. The Bayesian framework creates pragmatic constraints on the methodology that are linked to the interpretation of, and the belief in, the information presented, or referred to, by an experimenter in order for it to be the basis of a probability judgment by individual participants. It is shown that these constraints have not been satisfied in the past, and the question of whether they can be satisfied in principle is raised and answered negatively. The second kind of implications consists of two limitations in the scope of the Bayesian model. They regard (i) the background of revision (the Bayesian model considers only revising situations but not updating situations), and (ii) the notorious case of the null priors. In both cases Lewis' rule is an appropriate alternative to Bayes' rule, but its use faces the same operational difficulties

Prospect relativity: how choice options influence decision under risk.

In many theories of decision under risk (e.g., expected utility theory, rank-dependent utility theory, and prospect theory), the utility of a prospect is independent of other options in the choice set. The experiments presented here show a large effect of the available options, suggesting instead that prospects are valued relative to one another. The judged certainty equivalent for a prospect is strongly influenced by the options available. Similarly, the selection of a preferred prospect is strongly influenced by the prospects available. Alternative theories of decision under risk (e.g., the stochastic difference model, multialternative decision field theory, and range frequency theory), where prospects are valued relative to one another, can provide an account of these context effects

Behavioral-economics approach to auditors\u27 risk assessments

https://egrove.olemiss.edu/dl_proceedings/1044/thumbnail.jp

Simplicity, scientific inference and econometric modelling

Economic Schools;Econometric Models;Economic Methodology

Manipulationism, Ceteris Paribus Laws, and the Bugbear of Background Knowledge

According to manipulationist accounts of causal explanation, to explain an event is to show how it could be changed by intervening on its cause. The relevant change must be a ‘serious possibility’ claims Woodward 2003, distinct from mere logical or physical possibility—approximating something I call ‘scientific possibility’. This idea creates significant difficulties: background knowledge is necessary for judgments of possibili-ty. Yet the primary vehicles of explanation in manipulationism are ‘invariant’ generali-sations, and these are not well adapted to encoding such knowledge, especially in the social sciences, as some of it is non-causal. Ceteris paribus (CP) laws or generalisa-tions labour under no such difficulty. A survey of research methods such as case and comparative studies, randomised control trials, ethnography, and structural equation modeling, suggests that it would be more difficult and in some instances impossible to try to represent the output of each method in invariant generalisations; and that this is because in each method causal and non-causal background knowledge mesh in a way that cannot easily be accounted for in manipulationist terms. Ceteris paribus-generalisations being superior in this regard, a theory of explanation based on the latter is a better fit for social science

Scientific Conventions, Ethics and Legal Institutions

This article examines the use of epidemiology to evaluate Risks posed by toxic substances. Using illustrations drawn from an elaborate example, it argues that scientists applying usual conventions in doing statistical studies tend to ignore important normative issues

Human information processing research in auditing A review and synthesis

https://egrove.olemiss.edu/dl_proceedings/1144/thumbnail.jp