QTest: Quantitative Testing of Theories of Binary Choice.

Abstract

The goal of this paper is to make modeling and quantitative testing accessible to behavioral decision researchers interested in substantive questions. We provide a novel, rigorous, yet very general, quantitative diagnostic framework for testing theories of binary choice. This permits the nontechnical scholar to proceed far beyond traditionally rather superficial methods of analysis, and it permits the quantitatively savvy scholar to triage theoretical proposals before investing effort into complex and specialized quantitative analyses. Our theoretical framework links static algebraic decision theory with observed variability in behavioral binary choice data. The paper is supplemented with a custom-designed public-domain statistical analysis package, the QTest software. We illustrate our approach with a quantitative analysis using published laboratory data, including tests of novel versions of "Random Cumulative Prospect Theory." A major asset of the approach is the potential to distinguish decision makers who have a fixed preference and commit errors in observed choices from decision makers who waver in their preferences.