Decision Makers Facing Uncertainty: Theory versus Evidence

Giordani, Paolo E. and Schlag, Karl H. and Zwart, Sanne (2010) Decision Makers Facing Uncertainty: Theory versus Evidence. [Working Paper]. p. 37.

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Official URL: http://docenti.luiss.it/giordani/files/2009/02/att...

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Abstract/Index

This paper aims at assessing cultural differences in uncertainty attitude across Europe. We select questions from the European Values Survey (EVS) capturing salient features of uncertain scenarios ("safe versus uncertain", "freedom of choice" and "reduction of uncertainty"), and formalize these questions through simple decision-theoretic problems. We then consider three competing normative models of choice under uncertainty (subjective expected utility (SEU), maximin utility and minimax regret), and analyze how they behave when facing each decision problem. We obtain theoretical predictions and, using the EVS dataset, we test them via latent class analysis to estimate the distribution of these behaviors across EU15. We fi…nd a larger proportion of SEU maximizers (Bayesians) in northern countries than in southern countries. The opposite is true for maximin utility behavior. Only a few are consistent with minimax regret behavior.


Item Type:Report / Paper (Working Paper)
Research documents and activity classification:Working Papers > Refereed Working Papers / of international relevance
Divisions:Department of Business and Management
Additional Information:This paper has been accepted and published in the "Journal of Economic Psychology", Vol. 31(4), 2010.
Uncontrolled Keywords:Uncertainty, maximin, minimax regret, Bayesianism, cross-cultural differences, European Values Survey, latent class analysis.
MIUR Scientific Area:Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited By:Maria Teresa Nistico
Deposited On:25 Nov 2010 10:46
Last Modified:25 Nov 2010 11:23

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