This paper discusses two problems. (1) What happens to the conditional risk premium that a decisionmarker is willing to pay out of the middle prize in a lottery to avoid uncertainty concerning the middle prize outcome, when the probabilities of other prizes change? (2) What happens to the...

The Becker-DeGroot-Marschak mechanism is widely used to elicit decisionmakers' selling prices of lotteries. This mechanism leads, however, to the preference reversal phenomenon, which seemed to indicate nontransitive preferences. To solve this puzzle, Karni and Safra (1987) introduced a new...