TY - JOUR
T1 - First degree stochastic dominance violations
T2 - Decision weights and bounded rationality
AU - Levy, Haim
PY - 2008/4
Y1 - 2008/4
N2 - Expected Utility Theory, Rank Dependent Expected Utility and Cumulative Prospect Theory imply no First Degree Stochastic Dominance (FSD) violations. Prospect Theory and Configural Weight models either allow for FSD violation or even predict this phenomenon. I find experimentally that FSD violations are not significant, and hence conclude that they are due to bounded rationality rather than to a systematic and predictable effect. Moreover, the more transparent the FSD, the less violations are observed, which supports the bounded rationality hypothesis. Therefore, based on the FSD violations observed in my experiments, the above three paradigms cannot be rejected.
AB - Expected Utility Theory, Rank Dependent Expected Utility and Cumulative Prospect Theory imply no First Degree Stochastic Dominance (FSD) violations. Prospect Theory and Configural Weight models either allow for FSD violation or even predict this phenomenon. I find experimentally that FSD violations are not significant, and hence conclude that they are due to bounded rationality rather than to a systematic and predictable effect. Moreover, the more transparent the FSD, the less violations are observed, which supports the bounded rationality hypothesis. Therefore, based on the FSD violations observed in my experiments, the above three paradigms cannot be rejected.
UR - http://www.scopus.com/inward/record.url?scp=41149126045&partnerID=8YFLogxK
U2 - 10.1111/j.1468-0297.2008.02141.x
DO - 10.1111/j.1468-0297.2008.02141.x
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AN - SCOPUS:41149126045
SN - 0013-0133
VL - 118
SP - 759
EP - 774
JO - Economic Journal
JF - Economic Journal
IS - 528
ER -