Response functions

Oyarzun, Carlos, Sanjurjo, Adam and Nguyuen, Hien (2017) Response functions. European Economic Review, 98 1-31. doi:10.1016/j.euroecorev.2017.06.011

Attached Files (Some files may be inaccessible until you login with your UQ eSpace credentials)
Name Description MIMEType Size Downloads
UQ681069_OA.pdf Full text (open access) application/pdf 3.38MB 0

Author Oyarzun, Carlos
Sanjurjo, Adam
Nguyuen, Hien
Title Response functions
Journal name European Economic Review   Check publisher's open access policy
ISSN 0014-2921
Publication date 2017-09-01
Sub-type Article (original research)
DOI 10.1016/j.euroecorev.2017.06.011
Open Access Status File (Author Post-print)
Volume 98
Start page 1
End page 31
Total pages 31
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Language eng
Abstract Imagine that John must choose between two uncertain payoff distributions, knowing that the set of possible payoffs is the same for both, but nothing about the shapes of the distributions. In the first period he chooses either alternative and experiences a payoff as a result of his choice. Given this experienced payoff, in the second period he decides whether to choose the same alternative again, or switch. We model John’s second period choice with a response function, i.e., a mapping from obtained payoffs to the probability of choosing the same alternative in the second period. We first provide results on (i) how the shape of the response function affects both expected payoffs and exposure to risk, and (ii) what standard models of choice under uncertainty would predict about the shape of the response function. We then run an experiment to elicit subjects’ response functions, empirically characterize the heterogeneity across subjects with a mixture model, and illustrate how payoffs vary across response function types. Finally, we use our theoretical results, along with additional information that we collected from subjects, to interpret their response functions.
Keyword adaptive learning
response functions
experimental economics
stochastic dominance
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: HERDC Pre-Audit
School of Economics Publications
Version Filter Type
Citation counts: Scopus Citation Count Cited 0 times in Scopus Article
Google Scholar Search Google Scholar
Created: Tue, 15 Aug 2017, 11:57:29 EST by Alys Hohnen on behalf of School of Economics