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Risk, Uncertainty and Discrete Choice Models

Author

Listed:
  • André de Palma

    (THEMA,University of Cergy-Pontoise)

  • Moshe Ben-Akiva

    (Massachusetts Institute of Technology)

  • David Brownstone

    (University of California at Irvine)

  • Charles Holt

    (University of Virginia)

  • Thierry Magnac

    (Toulouse School of Economics)

  • Daniel McFadden

    (University of California, Berkeley)

  • Peter Moffatt

    (University of East Anglia)

  • Nathalie Picard

    (University of Cergy-Pontoise)

  • Kenneth Train

    (University of California, Berkeley)

  • Peter Wakker

    (Erasmus University)

  • Joan Walker

    (Boston University)

Abstract

This paper examines the cross-fertilizations of random utility models with the study of decision making under risk and uncertainty. We start with a description of the Expected Utility (EU) theory and then consider deviations from the standard EU frameworks, involving the Allais paradox and the Ellsberg paradox, inter alia. We then discuss how the resulting Non-EU framework can be modeled and estimated within the framework of discrete choices in static and dynamic contexts. Our objectives in addressing risk and ambiguity in individual choice contexts are to understand the decision choice process, and to use behavioral information for prediction, prescription and policy analysis.

Suggested Citation

  • André de Palma & Moshe Ben-Akiva & David Brownstone & Charles Holt & Thierry Magnac & Daniel McFadden & Peter Moffatt & Nathalie Picard & Kenneth Train & Peter Wakker & Joan Walker, 2008. "Risk, Uncertainty and Discrete Choice Models," THEMA Working Papers 2008-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2008-02
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    discrete choice; decision making; risk; uncertainty; (cumulative) prospect theory; ambiguity;
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