(), Glenn W. Harrison
, Morten Igel Lau
and Elisabet Rutström
Steffen Andersen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Glenn W. Harrison: Department of Economics, College of Business Administration, University of Central Florida, USA
Morten Igel Lau: Department of Economics and Finance, Durham Business School, Durham University, UK
Elisabet Rutström: Department of Economics, College of Business Administration, University of Central Florida, USA
Abstract: The most popular models of decision making use a single criteria to evaluate projects or lotteries. However, decision makers may actually consider multiple criteria when evaluating projects. We consider a dual criteria model from psychology. This model integrates the familiar tradeoffs between risk and utility that economists traditionally assume, allowance for rank-dependent decision weights, and consideration of income thresholds. We examine the issues involved in full maximum likelihood estimation of the model using observed choice data. We propose a general method for integrating the multiple criteria, using the logic of mixture models, which we believe is attractive from a decision-theoretic and statistical perspective. The model is applied to observed choices from a major natural experiment involving intrinsically dynamic choices over highly skewed outcomes. The evidence points to the clear role that income thresholds play in such decision making, but does not rule out a role for tradeoffs between risk and utility or probability weighting.
33 pages, January 2, 2009
Full text files
Questions (including download problems) about the papers in this series should be directed to Lars Nondal ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2018-01-23 23:31:15.