Negative recency, randomization device choice, and reduction of compound lotteries

We report an experiment in which subjects are not indifferent between real-money lotteries implemented with randomization devices that are equivalent under the Reduction Axiom. Instead, choice behavior is consistent with subjective distortion of conditional probability, and this persists in treatment conditions that control for (i) computational limitations and (ii) possible confounding by ratio bias.

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Year of publication:	2012
Authors:	Kaivanto, Kim ; Kroll, Eike B.
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 115.2012, 2, p. 263-267
Publisher:	Elsevier
Subject:	Reduction of compound lotteries \| Negative recency effect \| Law of small numbers \| Design of experiments \| St. Petersburg paradox \| Myopic loss aversion

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Type of publication:	Article
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; C91 - Laboratory, Individual Behavior
Source:	RePEc - Research Papers in Economics

Persistent link: https://ebvufind01.dmz1.zbw.eu/10011041611