Experiments on Decisions under Uncertainty: A Theoretical Framework
American Economic Review
vol. 106,
no. 7, July 2016
(pp. 1775-1801)
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.Citation
Shmaya, Eran, and Leeat Yariv. 2016. "Experiments on Decisions under Uncertainty: A Theoretical Framework." American Economic Review, 106 (7): 1775-1801. DOI: 10.1257/aer.20120978Additional Materials
JEL Classification
- C91 Design of Experiments: Laboratory, Individual
- D11 Consumer Economics: Theory
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness