A large number of widely replicated laboratory experiments document systematic violations of expected utility theory. This has led to the proliferation of behavioral models of decision under risk including most prominently Kahneman and Tversky’s prospect theory. These alternatives to expected utility theory generally introduce additional degrees of freedom, allowing the model to fit the data. This raises the question of the degree to which behavioral models may be overfitting in the laboratory setting. The models are a better fit to laboratory experimental data, but is this because they are fundamentally more consistent with behavioral motivations, or is it simply because they offer additional degrees of freedom? Just tests this using an out-of-sample prediction approach. He estimates expected utility and probability weighting-based models using standard laboratory experimental data. He then uses these estimates to predict behavior over choices based upon NY State Lottery games where probabilities are much smaller, and rewards can be much larger. Just finds expected utility estimates from the standard experiments to be far superior in their out-of-sample performance.
Bio:
David Just is the Susan Eckert Lynch Professorship in Science and Business in the Charles H. Dyson School of Applied Economics and Management at Cornell University. He received his PhD and MSc in the field of Agricultural and Resource Economics at the University of California Berkeley in 2001 and 1999 respectively. Just uses the tools of economics and psychology to explore individual decisions in markets and their implications for well-being and policy. He is the sole author of the award-winning Wiley textbook, Introduction to Behavioral Economics. Just has published more than 150 refereed journal articles with many focused on behavioral tools in the context of food choice and food insecurity. He has previously served as director of the graduate program and director of professional degree programs in the Dyson School, and as Area Coordinator for Applied Economics and Policy in the S.C. Johnson College of Business. He has also served as president of the Northeastern Agricultu! ral and R esource Economics Association. He recently served as co-editor for two volumes of the Handbook of Agricultural Economics. Just has won many national awards for outstanding research including several for Outstanding Journal Article in the American Journal of Agricultural Economics, as well as Quality of Research Discovery both in the Agricultural and Applied Economics Association and the European Association of Agricultural Economists. He was named a fellow of the Agricultural and Applied Economics Association in 2020.