Testing independence conditions in the presence of errors and splitting effects.

Birnbaum, Michael H., Schmidt, Ulrich and Schneider, Miriam D. (2017) Testing independence conditions in the presence of errors and splitting effects. Journal of Risk and Uncertainty, 54 (1). pp. 61-85. DOI 10.1007/s11166-017-9251-5.

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Abstract

This paper presents experimental tests of several independence conditions implied by expected utility and alternative models. We perform repeated choice experiments and fit an error model that allows us to discriminate between true violations of independence and those that can be attributed to errors. In order to investigate the role of event splitting effects, we present each choice problem not only in coalesced form (as in many previous studies) but also in split forms. It turns out previously reported violations of independence and splitting effects remain significant even when controlling for errors. However, splitting effects have a substantial influence on tests of independence conditions. When choices are presented in canonical split form, in which probabilities on corresponding probability-consequence ranked branches are equal, violations of the properties tested could be reduced to insignificance or even reversed.

Document Type: Article
Keywords: Coalescing Errors Expected utility Independence axiom Prospect theory Risky decision making Splitting effects
Research affiliation: Kiel University > Kiel Marine Science
OceanRep > The Future Ocean - Cluster of Excellence
Kiel University
Refereed: Yes
Open Access Journal?: No
DOI etc.: 10.1007/s11166-017-9251-5
ISSN: 0895-5646
Projects: Future Ocean
Date Deposited: 21 Dec 2017 10:35
Last Modified: 15 Apr 2019 11:53
URI: http://oceanrep.geomar.de/id/eprint/41042

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