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
Publisher:	Karlsruhe : Karlsruher Institut für Technologie (KIT), Institut für Volkswirtschaftslehre (ECON)
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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Series:	KIT Working Paper Series in Economics ; 22
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	10.5445/IR/1000022861 [DOI] 656578912 [GVK] hdl:10419/45178 [Handle] RePEc:zbw:kitwps:22 [RePEc]
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; C91 - Laboratory, Individual Behavior
Source:	EconStor

Persistent link: https://www.econbiz.de/10010304515