A behavioral approach of decision making under risk and uncertainty

Overview & Synopsis

This thesis investigates how individuals make decisions under risk and uncertainty. It is composed of four essays that theoretically and experimentally investigate decision-making.The first two essays study situations where a decision maker has to decide whether an event has occurred using uncertain evidence. Accurately identifying that this event has occurred is more rewarded than accurately identifying that it has not occurred. This decision problem induces a divergence between two qualities of a decision: optimality and accuracy. Both essays reproduce such situations in a laboratory experiment based on perceptual tasks and analyze behavior using Signal Detection Theory to study the optimality-accuracy trade-off. The first essay confirms the existence of the trade-off with a leading role of accuracy. It explains the trade-off by the concern of individuals for being right. The second chapter finds that presenting perceptual evidence last contributes to the existence of the optimality-accuracy trade-off.The third essay studies how other-regarding preferences interact with attitude toward ambiguity. It reports the results of an experiment where subjects have to make donations to charities. Donations may have either ambiguous costs or ambiguous benefits. We find that other-regarding preferences are decreased under ambiguity. In other terms, we highlight that individual use ambiguity has an excuse not to give. This excuse-driven behavior is stronger for ambiguous costs than ambiguous benefits.The fourth essay challenges the external validity of laboratory risk preference measures using behavior in experimental risk tasks and naturally occurring behavior under risk. We find that risk preference measures are related with the former but that they fail to explain the latter.