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...

We use a simple, three-item test for cognitive abilities to investigate whether established behavioral biases that play a prominent role in behavioral economics and finance are related to cognitive abilities. We find that higher test scores on the Cognitive Reflection Test of Frederick (2005)...

Two recently published studies argue that conventional parameterizations of cumulative prospect theory (CPT) fail to resolve the St. Petersburg Paradox. Yet as a descriptive theory CPT is not intended to account for the local representativeness effect, which is known to induce 'alternation bias'...

Human judgments are systematically affected by various biases and distortions. The main goal of our study is to analyze the effects of five well-documented behavioral biases-namely, the disposition effect, herd behavior, availability heuristic, gambler's fallacy and hot hand fallacy-on the...

Does students' hand tremble after marking three consecutive identical answers in a multiple choice test? We design an experiment to study if the likelihood to change incorrectly to a different answer than the last one depends on the number of identical previous answers. We do not find a clear...

Anchoring and overconfidence are some of the best-known biases in psychology and behavioral finance literature. While a number of studies have investigated the evidence of these biases and explored the motives and human factors that contribute to the one's susceptibility to the effects, little...

We use a simple, three-item test for cognitive abilities to investigate whether established behavioral biases that play a prominent role in behavioral economics and finance are related to cognitive abilities. We find that higher test scores on the Cognitive Reflection Test of Frederick (2005)...

Using hypothetical lottery choices to measure risk preferences, Frederick (2005) finds that higher cognitive ability is associated with less risk aversion. This paper documents, however, that when using an incentive compatible measure of risk preference, attitudes towards risk are not associated...

Informed decisions are the cornerstone of a functioning democracy. The goal of this paper is twofold. First, to explore who is good at distinguishing between true and false, and, second, to learn something about mechanisms to debunk false news stories. In an experimental study, subjects were...

We investigated experimentally whether people can be induced to believe in a non-existent expert, and subsequently pay for what can only be described as transparently useless advice about future chance events. Consistent with the theoretical predictions made by Rabin (2002) and Rabin and Vayanos...