From Uniform Expected Utility to Uniform Rank-Dependent Utility: An experimental study

This paper presents an experimental investigation of the Uniform Expected Utility (UEU) criterion, a model for ranking sets of uncertain outcomes. We verified whether the two behavioral axioms characterizing UEU, i.e., Averaging and Restricted Independence, are satisfied in a pairwise choice experiment with monetary gains. Our results show that neither of these axioms holds in general. Averaging in particular, appears to be violated on a large scale. On the basis of the current study and a previous one, we can conclude that none of the models for set ranking that have been axiomatically characterized so far is able to model observed choices between sets of possible outcomes in a satisfactory fashion. In this paper we therefore lay out the foundations for a new descriptive model for set ranking: the Uniform Rank-Dependent Utility (URDU) criterion. (C) 2015 Elsevier Inc. All rights reserved.