S. Andersen
Dual criteria decisions
Andersen, S.; Harrison, G.W.; Lau, M.I.; Rutström, E.E.
Abstract
The most popular models of decision making use a single criterion to evaluate projects or lotteries. However, decision makers may actually consider multiple criteria when evaluating projects. We consider a dual criteria model from psychology. This model integrates the familiar tradeoffs between risk and utility that economists traditionally assume, allowance for rank-dependent decision weights, and consideration of income thresholds. We examine the issues involved in full maximum likelihood estimation of the model using observed choice data. We propose a general method for integrating the multiple criteria, using the logic of mixture models, which we believe is attractive from a decision-theoretic and statistical perspective. The model is applied to observed choices from a major natural experiment involving intrinsically dynamic choices over highly skewed outcomes. The evidence points to the clear role that income thresholds play in such decision making, but does not rule out a role for tradeoffs between risk and utility or probability weighting.
Citation
Andersen, S., Harrison, G., Lau, M., & Rutström, E. (2014). Dual criteria decisions. Journal of Economic Psychology, 41, 101-113. https://doi.org/10.1016/j.joep.2013.02.006
Journal Article Type | Article |
---|---|
Online Publication Date | Feb 26, 2013 |
Publication Date | Apr 1, 2014 |
Deposit Date | Jun 4, 2014 |
Publicly Available Date | Jul 22, 2014 |
Journal | Journal of Economic Psychology |
Print ISSN | 0167-4870 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 41 |
Pages | 101-113 |
DOI | https://doi.org/10.1016/j.joep.2013.02.006 |
Keywords | Risk, Multiple criteria, Individual decision making, Natural experiment. |
Public URL | https://durham-repository.worktribe.com/output/1450689 |
Files
Accepted Journal Article
(242 Kb)
PDF
Copyright Statement
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economic Psychology. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Psychology, 41, 2014, 10.1016/j.joep.2013.02.006.
You might also like
The Risk of Gambling Problems in the General Population: A Reconsideration
(2019)
Journal Article
Temporal Stability of Cumulative Prospect Theory
(2019)
Book Chapter
Risk Attitudes, Sample Selection and Attrition in a Longitudinal Field Experiment
(2019)
Journal Article
Multiattribute Utility Theory, Intertemporal Utility and Correlation Aversion
(2018)
Journal Article
Downloadable Citations
About Durham Research Online (DRO)
Administrator e-mail: dro.admin@durham.ac.uk
This application uses the following open-source libraries:
SheetJS Community Edition
Apache License Version 2.0 (http://www.apache.org/licenses/)
PDF.js
Apache License Version 2.0 (http://www.apache.org/licenses/)
Font Awesome
SIL OFL 1.1 (http://scripts.sil.org/OFL)
MIT License (http://opensource.org/licenses/mit-license.html)
CC BY 3.0 ( http://creativecommons.org/licenses/by/3.0/)
Powered by Worktribe © 2025
Advanced Search