IS CHOICE THE CORRECT PRIMITIVE - ON USING CERTAINTY EQUIVALENTS AND REFERENCE LEVELS TO PREDICT CHOICES AMONG GAMBLES

Choice is viewed as a derived, not a primitive, concept. Individual ga mbles are assigned subjective certainty equivalents (CE1); the choice set X has an associated reference level [RL(X)] based on the CE1s of i ts members; the outcomes of each gamble are recoded as deviations from the RL(X); and new CE2s are constructed. The gamble having the larges t CE2 is chosen. The CEs are described by the rank- and sign-dependent theory of Luce (1992b). The concept of RL is studied axiomatically. T he model predicts many behavioral anomalies and is tested with data se ts of Mellers, Chang, Birnbaum, and Ordonez (1992).