The reduction of compound lotteries (ROCL) has assumed a central role in the evaluation of behavior towards risk and uncertainty. We present experimental evidence on its validity in the domain of objective probabilities. Our experiment explicitly recognizes the impact that the random lottery...

The theoretical literature has a rich characterization of scoring rules for eliciting the subjective beliefs that an individual has for continuous events, but under the restrictive assumption of risk neutrality. It is well known that risk aversion can dramatically affect the incentives to...

Measures of risk attitudes derived from experiments are often questioned because they are based on small stakes bets and do not account for the extent to which the decision-maker integrates the prizes of the experimental tasks with personal wealth. We exploit the existence of detailed...

The theoretical literature has a rich characterization of scoring rules for eliciting the subjective beliefs that an individual has for continuous events, but under the restrictive assumption of risk neutrality. It is well known that risk aversion can dramatically affect the incentives to...

We evaluate the binary lottery procedure for inducing risk neutral behavior in a subjective belief elicitation task. Harrison, Martinez-Correa and Swarthout [2013] found that the binary lottery procedure works robustly to induce risk neutrality when subjects are given one risk task defined over...

Experiments are conducted with various purposes in mind including theory testing, mechanism design and measurement of individual characteristics. In each case a careful researcher is constrained in the experimental design by prior considerations imposed either by theory, common sense or past...

Subjective probabilities play a role in many economic decisions. There is a large theoretical literature on the elicitation of subjective probabilities, and an equally large empirical literature. However, there is a gulf between the two. The theoretical literature proposes a range of procedures...

We study the risk attitudes of an important segment of the economy: managers. We conduct artefactual field experiments with 130 managers from 12 industrial companies. Our analysis is particularly careful to evaluate alternative models of decision-making under risk. In general, we find that the...

We show that observed choices in discounting experiments are consistent with roughly one-half of the subjects using exponential discounting and one-half using quasi-hyperbolic discounting. We characterize the latent data generating process using a mixture model which allows different subjects to...

Developments in the theory of risk require yet another evaluation of the behavioral validity of the independence axiom. This axiom plays a central role in most formal statements of expected utility theory, as well as popular alternative models of decision-making under risk, such as...