Violations of the independence axiom in common ratio problems: An experimental test of some competing hypotheses

In recent years, many new theories of choice under uncertainty have been proposed as alternatives to expected utility theory. Among the best known of such theories are Machina’s generalized expected utility theory, Kahneman and Tversky’s prospect theory and the rank-dependent theory of Quiggin and Yaari. In this paper, the authors present the results of an experiment in which they tested some of the predictions of these theories. A major task of the paper is to describe the strategy the authors adopted for testing prospect theory and rank-dependent theory; this, as far as is known is new.