Validating the predictions of case-based decision theory
Real-life decision-makers typically do not know all possible outcomes arising from alternative courses of action. Instead, when people face a problem, they may rely on the recollection of their past personal experience: the situation, the action taken, and the accompanying consequence. In addition, the applicability of a past experience in decision-making may depend on how similar the current problem is to situations encountered previously. Case-based decision theory (CBDT), proposed by Itzhak Gilboa and David Schmeidler (1995), formalises this type of analogical reasoning. While CBDT is intuitively appealing, only a few experimental and empirical studies have attempted to validate its predictions. This thesis reports two laboratory experiments and an empirical study that attempt to confirm the predictive power of CBDT vis-à-vis Bayesian reasoning.
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