Please use this identifier to cite or link to this item: http://hdl.handle.net/2381/36958
Title: A Generalized Probability Framework to Model Economic Agents' Decisions Under Uncertainty
Authors: Haven, E.
Sozzo, Sandro
First Published: 2016
Publisher: Elsevier
Citation: International Review of Financial Analysis (Accepted, In Press)
Abstract: The applications of techniques from statistical (and classical) mechanics to model interesting problems in economics and finance has produced valuable results. The principal movement which has steered this research direction is known under the name of `econophysics'. In this paper, we illustrate and advance some of the findings that have been obtained by applying the mathematical formalism of quantum mechanics to model human decision making under `uncertainty' in behavioral economics and finance. Starting from Ellsberg's seminal article, decision making situations have been experimentally verified where the application of Kolmogorovian probability in the formulation of expected utility is problematic. Those probability measures which by necessity must situate themselves in Hilbert space (such as `quantum probability') enable a faithful representation of experimental data. We thus provide an explanation for the effectiveness of the mathematical framework of quantum mechanics in the modeling of human decision making. We want to be explicit though that we are not claiming that decision making has microscopic quantum mechanical features.
DOI Link: 10.1016/j.irfa.2015.12.002
ISSN: 1057-5219
Links: http://www.sciencedirect.com/science/article/pii/S1057521915002124?np=y
http://hdl.handle.net/2381/36958
TBA
Embargo on file until: 1-Jan-10000
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2015 Elsevier Inc. All rights reserved. This manuscript version is made available after the end of the embargo period under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/ 
Description: 13 pages, standard Latex. arXiv admin note: text overlap with arXiv:1302.3850. The file associated with this record is under a 36-month embargo from publication in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.
Appears in Collections:Published Articles, School of Management

Files in This Item:
File Description SizeFormat 
RevisedSubmittedIRFA2015SozzoHaven.pdfPost-review (final submitted)156.47 kBAdobe PDFView/Open


Items in LRA are protected by copyright, with all rights reserved, unless otherwise indicated.