The book-making argument was introduced by de Finetti as a principle to prove the existence and uniqueness of subjective probabilities. It has subsequently been accepted as a principle of rationality for decisions under uncertainty. This note shows that the book-making argument has relevant...

This study extends experimental tests of (cumulative) prospect theory (PT) over prospects with more than three outcomes and tests second-order stochastic dominance principles (Levy and Levy, Management Science 48:1334–1349, <CitationRef CitationID="CR44">2002</CitationRef>; Baucells and Heukamp, Management Science 52:1409–1423, <CitationRef CitationID="CR10">2006</CitationRef>)....</citationref></citationref>

The majority consensus in the empirical literature is that probability weighting functions are typically inverse-S shaped, that is, people tend to overweight small and underweight large probabilities. A separate stream of literature has reported event-splitting effects (also called violations of...

In this paper we experimentally investigate the disparity between willingness-to-accept (WTA) and willingness-to-pay (WTP) for risky lotteries. The direction of the income effect is reversed by endowing subjects with the highest price of a lottery when asking the WTP question. Our results show...

In contrast to the assumptions of standard economic theory, recent experimental evidence shows that the income of peers has a systematic impact on observed degrees of risk aversion. This paper reports the findings of two experiments examining the impact of income inequality on risk preferences...

This paper presents an experimental study of common consequence effects in binary choice, willingness-to-pay (WTP) elicitation, and willingness-to-accept (WTA) elicitation. We find strong evidence in favor of the fanning out hypothesis (Machina, Econometrica 50:277–323, <CitationRef CitationID="CR14">1982</CitationRef>) for both WTP and...</citationref>

Common ratio effects should be ruled out if subjects’ preferences satisfy compound independence, reduction of compound lotteries, and coalescing. In other words, at least one of these axioms should be violated in order to generate a common ratio effect. Relying on a simple experiment, we...