The risk-structure dependence effect: Experimenting with an eye to decision-aiding

In this paper, we aim at obtaining, from an experimental design in decision making under risk, richer and more appropriate information for management scientists involved in decision-aiding. We design a method of direct elicitation of individual indifference curves in the Marschak–Machina triangle (i.e., the set of all probability distributions over three fixed outcomes). Our results show that indifference curves clearly take quite different types of shape according to their location within the triangle, i.e. that preferences under risk fundamentally depend on the risk-structure (as defined in the paper) faced by the decision maker. Furthermore, the risk-structure dependence effect explains the indecisive results of previous experimental/econometric studies trying to rank different models according to their descriptive power.