Results 1 
2 of
2
Bounded Rationality and Limited Datasets: Testable Implications, Identifiability, and OutofSample Prediction
, 2012
"... Theories of bounded rationality are typically characterized over an exhaustive data set. This paper aims to operationalize some leading theories when the available data is limited, as is the case in most practical settings. How does one tell if observed choices are consistent with a theory of bounde ..."
Abstract

Cited by 1 (0 self)
 Add to MetaCart
Theories of bounded rationality are typically characterized over an exhaustive data set. This paper aims to operationalize some leading theories when the available data is limited, as is the case in most practical settings. How does one tell if observed choices are consistent with a theory of bounded rationality if the data is incomplete? What information can be identified about preferences? How can outofsample predictions be made? Our approach is contrasted with earlier attempts to examine bounded rationality theories on limited data, showing their notion of consistency is inappropriate for identifiability and outofsample prediction.
OPTIMISM AND PESSIMISM WITH EXPECTED UTILITY By
, 2011
"... Savage (1954) provided a set of axioms on preferences over acts that were equivalent to the existence of an expected utility representation. We show that in addition to this representation, there is a continuum of other “expected utility”representations in which for any act, the probability distribu ..."
Abstract
 Add to MetaCart
Savage (1954) provided a set of axioms on preferences over acts that were equivalent to the existence of an expected utility representation. We show that in addition to this representation, there is a continuum of other “expected utility”representations in which for any act, the probability distribution over states depends on the corresponding outcomes. We suggest that optimism and pessimism can be captured by the stakedependent probabilities in these alternative representations; e.g., for a pessimist, the probability of every outcome except the worst is distorted down from the Savage probability. Extending the DM’s preferences to be de…ned on both subjective acts and objective lotteries, we show how one may distinguish optimists from pessimists and separate attitude towards uncertainty from curvature of the utility function over monetary prizes.