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:	2011
Authors:	Kaivanto, Kim ; Kroll, Eike Benjamin
Institutions:	Fakultät für Wirtschaftswissenschaften, Karlsruhe Institut für Technologie
Subject:	reduction of compound lotteries \| negative recency effect \| gambler's fallacy \| law of small numbers \| randomization devices \| instruments and materials \| design of experiments \| St. Petersburg paradox

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Extent:	application/pdf
Series:	Working Paper Series in Economics. - ISSN 2190-9806.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 22
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; C91 - Laboratory, Individual Behavior
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009004775