The Impact of Experience on Violations of Independence and Coalescing

The present paper reports a repeated experiment on decision making under risk where subjects have to tackle the same choice problems in several rounds. We fit a simple error model and investigate how behavior changes in the course of the experiment. Our analysis complements and extends Hey (2001) who analyzes for each subject the fit of several preference functionals from round to round. Instead, we focus on choice problems allowing for direct tests of independence and coalescing. We show that variability of responses as well as violations of independence and coalescing decrease from earlier to later rounds. Our results provide evidence in favor of expected utility in conjunction with the discovered preference hypothesis.