An Empirical Evaluation of the Toolbox Model of Lottery Choices
The Review of Economics and Statistics
2018
Can a toolbox of simple heuristic rules help explain lottery choices relative to expected utility theory (EUT)? While a mixture model of EUT plus heuristic rules will obviously fit data better than EUT only, given the small sample sizes, there is a danger of overfitting. Therefore, instead of goodness-of-fit measures, we focus on forecasting performance. Using two data sets of binary lottery choices and reasonable holdout subsets for testing forecasting performance, we find that the EUT-only model forecasts better than the toolbox mixture model with EUT. Even when the toolbox model with EUT fits the data significantly better, EUT-only forecasts better.
- DOI
- 10.1162/rest_a_00700
- Volume
- 100 (3)
- Pages
- 528-534
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref