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Posterior Probabilities of the Independence Axiom with Nonexperimental Data (or Buckle Up and Fan Out)

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  • Marshall, Robert C
  • Richard, Jean-Francois
  • Zarkin, Gary A

Abstract

This article addresses the issues associated with the construction of posterior probabilities for violation of the independence axiom of expected utility from nonexperimental data. To illustrate the methodology of analyzing nonexperimental evidence, the authors consider seat-belt-usage-data. They find a posterior probability close to one of an Allais-type paradox in these data. In addition, the evidence is not inconsistent with Machina's Hypothesis II but is inconsistent with the "light" hypothesis of Chew and Waller.

Suggested Citation

  • Marshall, Robert C & Richard, Jean-Francois & Zarkin, Gary A, 1992. "Posterior Probabilities of the Independence Axiom with Nonexperimental Data (or Buckle Up and Fan Out)," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 31-44, January.
    • Handle: RePEc:bes:jnlbes:v:10:y:1992:i:1:p:31-44
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    1. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
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    5. Camerer, Colin F, 1989. "An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
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