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Testing Independence Conditions in the Presence of Errors and Splitting Effects

Birnbaum, Michael H.; Schmidt, Ulrich; Schneider, Miriam D. - Institut für Weltwirtschaft (IfW) - 2010

models. We perform a repeated choice experiment and fit an error model that allows us to discriminate between true violations …

Persistent link: https://www.econbiz.de/10008631614

Allais Paradoxes Can be Reversed by Presenting Choices in Canonical Split Form

Birnbaum, Michael H.; Schmidt, Ulrich - Institut für Weltwirtschaft (IfW) - 2010

This paper tests Birnbaum’s (2004) theory that the constant consequence paradoxes of Allais are due to violations of coalescing, the assumption that when two branches lead to the same consequence, they can be combined by adding their probabilities. Rank dependent utility and cumulative...

Persistent link: https://www.econbiz.de/10008631616

Enjoyment takes time: Some implications for choice theory

Nisticò, Sergio - Institut für Weltwirtschaft (IfW) - 2014

The paper suggests that casting the choice problem in terms of alternative time-consuming activities can foster the fruitful cross-fertilization between economics and psychology along the lines suggested by Scitovsky in the Joyless Economy. The first part emphasizes how mainstream, utility-based...

Persistent link: https://www.econbiz.de/10010983170

Paradoxes and Mechanisms for Choice under Risk

Cox, James C.; Sadiraj, Vjollca; Schmidt, Ulrich - Institut für Weltwirtschaft (IfW) - 2011

hypothesis or the independence axiom. We report two experiments with 710 subjects. Experiment 1 provides the first simple test of … the isolation hypothesis. Experiment 2 is a crossed design with six payoff mechanisms and five lottery pairs that can … implications of alternative decision theories. Experiment 2 provides tests of the isolation hypothesis and four paradoxes. It also …

Persistent link: https://www.econbiz.de/10009144796

Explaining the harmonic sequence paradox

Schmidt, Ulrich; Zimper, Alexander - Institut für Weltwirtschaft (IfW) - 2011

According to the harmonic sequence paradox (Blavatskyy 2006), an expected utility decision maker's willingness-to-pay for a gamble whose expected payoffs evolve according to the harmonic series is finite if and only if his marginal utility of additional income becomes zero for rather low payoff...

Persistent link: https://www.econbiz.de/10009216280

Pricing risk and ambiguity: The effect of perspective taking

Trautmann, Stefan T.; Schmidt, Ulrich - Institut für Weltwirtschaft (IfW) - 2011

There is a large literature showing that willingness-to-accept (WTA) is usually much higher than willingness-to-pay (WTP) in empirical studies although they should be roughly equal according to traditional economic theory. A second stream of literature shows that people are typically ambiguity...

Persistent link: https://www.econbiz.de/10009276732

Endogenous Prospect Theory

Schmidt, Ulrich; Zank, Horst - Institut für Weltwirtschaft (IfW) - 2010

In previous models of (cumulative) prospect theory reference-dependence of preferences is imposed beforehand and the location of the reference point is exogenously determined. This paper provides an axiomatization of a new specification of cumulative prospect theory, termed endogenous prospect...

Persistent link: https://www.econbiz.de/10010955835

An experimental investigation of the disparity between WTA and WTP for lotteries

Schmidt, Ulrich; Traub, Stefan - Institut für Weltwirtschaft (IfW) - 2009

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...

Persistent link: https://www.econbiz.de/10010956013

Estimating risk attitudes in conventional and artefactual lab experiments: The importance of the underlying assumptions

Drichoutis, Andreas C.; Koundouri, Phoebe - Institut für Weltwirtschaft (IfW) - 2012

In this paper the authors assess the importance of sample type in the estimation of risk preferences. The authors elicit and compare risk preferences from student subjects and subjects drawn from the general population, using the multiple price list method devised by Holt and Laury (Risk...

Persistent link: https://www.econbiz.de/10010956059

Reconsidering the common ratio effect: The roles of compound independence, reduction, and coalescing

Schmidt, Ulrich; Seidl, Christian - Institut für Weltwirtschaft (IfW) - 2014

effect. Relying on a simple experiment, we investigate which failure of these axioms is concomitant with the empirical …

Persistent link: https://www.econbiz.de/10010886877