Decision Theory

Decision theory seeks to offer formal representations of individual decision-making processes. One important purpose of decision theory is to develop mathematical models that account for individual decision-making. In axiomatic decision theory, in particular, instead of suggesting models directly, researchers posit testable assumptions (i.e., axioms) about behavior and find ways to represent them in mathematically convenient terms. In this way, decision theory is closely related to experimental research: axioms are tested using data obtained in controlled laboratory experiments. If some axioms are violated frequently, it highlights the necessity of modifying the model to replace the violated axiom. We then test the new axiom again by using data from carefully conducted laboratory experiments and judge how well this new axiom is able to account for the choice behavior observed in the experiments. This close relationship between theory and experiments is important for the development of new and better models of individual decision-making. 

The following are a sampling of publications in this field by scholars affiliated with CTESS:

• "Time-Varying Risk Aversion? Evidence from Near-Miss Accidents" (2022) by Matt Shum and Yi Xin, Review of Economics and Statistics.
• "When Choices are Mistakes" (2022) by Kirby Nielsen and John Rehbeck, American Economic Review.
• "Tailoring Intertemporal Incentives: an Application to Polio Vaccination Drives in Pakistan" (forthcoming) by James Andreoni, Michael Callen, Karrar Jaffar, Yasir Khan, and Charles Sprenger, Journal of the European Economic Association.
• "Approximate Expected Utility Rationalization" (2022) by Federico Echenique, Taisuke Imai, and Kota Saito, Journal of the European Economic Association.
• "Model and Predictive Uncertainty: A Foundation for Smooth Ambiguity Preferences" (2022) by Tommaso Denti and Luciano Pomatto, Econometrica.
• "Testable Implications of Models of Intertemporal Choice: Exponential Discounting and Its Generalizations" (2021) by Federico Echenique, Taisuke Imai, and Kota Saito, American Economic Journal: Microeconomics.
• "Deterrence Effects of Enforcement Schemes: an Experimental Study" (2021) by Marina Agranov and Anastasia Buyalskaya, Management Science.
• "On the Empirical Validity of Cumulative Prospect Theory: Experimental Evidence of Rank-Independent Probability Weighting" (2020) by Doug Bernheim and Charles Sprenger, Econometrica.