Do People Maximize Quantiles?

48 Pages Posted: 9 Jun 2020

See all articles by Luciano I. de Castro

Luciano I. de Castro

Tippie College of Business

Antonio F. Galvao

Michigan State University

Charles Noussair

University of Arizona

Liang Qiao

University of Arizona

Date Written: May 22, 2020


Payoff quantiles have been used for decision making in banking and investment (in the form of Value-at-Risk) and in the mining, oil and gas industries (in the form of "probabilities of exceeding" a certain level of production). However, it is unknown how common quantile-based decision making actually is among typical individual decision makers. This paper describes an experiment that aims to (1) compare how common quantile decision making is relative to expected utility maximization, and (2) estimate risk attitude parameters under the assumption of quantile preferences. The experiment has two parts. In the first part, individuals make pairwise choices between risky lotteries, and the competing models are fitted to the choice data. In the second part, we directly elicit a decision rule from a menu of alternatives. The results show that a quantile preference model outperforms expected utility for a considerable minority, 30%--50%, of participants, depending on the metric. The majority of individuals are risk averse, and women are more risk averse than men, under both models.

Keywords: Quantile Preference, Risk Attitude, Experiment

JEL Classification: D81, C91

Suggested Citation

de Castro, Luciano I. and Galvao, Antonio F. and Noussair, Charles and Qiao, Liang, Do People Maximize Quantiles? (May 22, 2020). Available at SSRN: or

Luciano I. De Castro

Tippie College of Business ( email )

108 Pappajohn Building
Iowa City, IA 52242
United States

HOME PAGE: http://

Antonio F. Galvao (Contact Author)

Michigan State University ( email )

486 W. Circle Drive 110 Marshall-Adams Hall
East Lansing, MI 48824
United States

Charles Noussair

University of Arizona ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

Liang Qiao

University of Arizona ( email )

Physics Department
The University of Arizona
Tucson, AZ 85718
United States

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