This thesis studies identification and testability for three models of choice under uncertainty. Identification is concerned with whether the parameters of a specified model are uniquely recoverable from observable behavior. Testability is concerned with how to test the consistency between the model’s predictions and choice data. All models considered deviate from classic models in one of two ways: either randomness in preference varies with decision problems, or preferences violate expected utility theory.
Chapter 1 studies a model of rational inattention. An agent can acquire costly information about uncertain states of the world before choosing an action from a menu. The choice of information depends on the menu of actions and is assumed unobservable. Due to the unobservability of private information, the choice of action appears random from an outside analyst’s perspective. I show that, given only stochastic choice from menus of actions, an analyst can identify the agent’s risk attitude, prior belief, and information cost function.
Chapter 2 studies an instance of the classic question of whether preference can be identified from the choice behavior it implies. Specifically, the question is whether the distribution of risk preferences is identifiable from random choice of lotteries. It is known that the answer is affirmative under random expected utility. I show that such uniqueness fails if risk preferences are not restricted a priori to conform to expected utility, for instance, if they are assumed to conform only to weighted utility. I discuss the reason for such non-uniqueness and argue that uniqueness may be restored if data includes the joint distributions of choice across a limited number of feasible sets.
Chapter 3 studies how to test non-expected utility theory given that data contain only finitely many observations on choice of lottery. While consistency of data with expected utility has been thoroughly studied in the literature, I derive conditions on data that are both necessary and sufficient for consistency with maximization of a betweenness preference. The conditions employ novel geometric arguments and provide a more stringent test than what is used in the experimental literature, which is to check for direct violations of the key axiom.
| Identifer | oai:union.ndltd.org:bu.edu/oai:open.bu.edu:2144/41523 |
| Date | 09 October 2020 |
| Creators | Lin, Yi-Hsuan |
| Contributors | Epstein, Larry G. |
| Source Sets | Boston University |
| Language | en_US |
| Detected Language | English |
| Type | Thesis/Dissertation |
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