Experiments on decisions under uncertainty:a theoretical framework

Eran Shmaya, Leeat Yariv

Research output: Contribution to journalArticle

8 Scopus citations

Abstract

The analysis of lab data entails a joint test of the underlying theory and of subjects' conjectures regarding the experimental design itself, how subjects frame the experiment. We provide a theoretical framework for analyzing such conjectures. We use experiments of decision making under uncertainty as a case study. Absent restrictions on subjects' framing of the experiment, we show that any behavior is consistent with standard updating ("anything goes"), including those suggestive of anomalies such as overconfidence, excess belief stickiness, etc. When the experimental protocol restricts subjects' conjectures (plausibly, by generating information during the experiment), standard updating has nontrivial testable implications.

Original languageEnglish (US)
Pages (from-to)1775-1801
Number of pages27
JournalAmerican Economic Review
Volume106
Issue number7
DOIs
StatePublished - Jul 2016
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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