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Measuring natural source dependence

Published online by Cambridge University Press:  14 March 2025

Cédric Gutierrez  and
Emmanuel Kemel Open the ORCID record for Emmanuel Kemel [Opens in a new window]
Cédric Gutierrez*
Affiliation:
Department of Management and Technology and ICRIOS, Bocconi University, 20136 Milan, Italy
Emmanuel Kemel*
Affiliation:
GREGHEC, CNRS & HEC Paris, 78351 Jouy-en-Josas, France
*
[email protected]
[email protected]
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Abstract

The consequences of most economic decisions are uncertain; they are conditional on events with unknown probabilities that decision makers evaluate based on their beliefs. In addition to consequences and beliefs, the context that generates events—the source of uncertainty—can also impact preferences, a pattern called source dependence. Despite its importance, there is currently no definition of source dependence that allows for comparisons across individuals and sources. This paper presents a tractable definition of source dependence by introducing a function that matches the subjective probabilities of events generated by two sources. It also presents methods for estimating such functions from a limited number of observations that are compatible with commonly-used choice-based approaches for separating attitudes from beliefs. As an illustration, we implement these methods on three datasets, including two original experiments, and show that they consistently capture clear, albeit heterogeneous, patterns of source dependence between natural sources. Our approach provides a framework for future research to explore how source dependence varies across individuals and situations.

Keywords

Decision under uncertaintyAmbiguity aversionSources of uncertaintySubjective beliefsSource dependenceFamiliarity bias

JEL classification

C91: Laboratory, Individual Behavior D81: Criteria for Decision-Making under Risk and Uncertainty
Type
Original Paper
Information
Experimental Economics , Volume 27 , Issue 2 , April 2024 , pp. 379 - 416
Copyright
Copyright © The Author(s), under exclusive licence to Economic Science Association 2024. Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

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Footnotes

The authors acknowledge financial support from the Investissements d’Avenir Labex Ecodec/ANR-11-LABX-0047 for making this research possible. Note: The replication material for the study is available at https://doi.org/10.3886/E195941V2.

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