In this paper we experimentally test skewness preferences at the individual level. Several prospects that can be ordered with respect to the third-degree stochastic dominance (3SD) criterion are ranked by the participants of the experiment. We find that the skewness of a distribution has a...

Credence goods, such as car repairs or medical services, are characterized by severe informational asymmetries between sellers and consumers, leading to fraud in the form of provision of insufficient service (undertreatment), provision of unnecessary service (overtreatment) and charging too much...

Cumulative prospect theory introduced the weighting of probabilities as an additional component to capture risk attitudes. However, this addition would be a less significant challenge to expected utility theory (EU) if utility curvature and probability weighting showed strong positive...

Abstract Popular models for decision making under ambiguity assume that people use not one but multiple priors. This paper is a first attempt to experimentally elicit multiple priors. In an ambiguous scenario with two underlying states we measure a subject’s single prior, her other potential...

Cumulative prospect theory introduced the weighting of probabilities as an additional component to capture risk attitudes. However, this addition would be a less significant challenge to expected utility theory (EU) if utility curvature and probability weighting showed strong positive...

We present an experiment designed to test the Modigliani-Miller theorem. Applying a general equilibrium approach and not allowing for arbitrage among firms with different capital structures, we find that, in accordance with the theorem, participants well recognize changes in the systematic risk...

We examine the influence of guilt and trust on the performance of credence goods markets. An expert can make a promise to a consumer first, whereupon the consumer can express her trust by paying an interaction price before the expert's provision and charging decisions. We argue that the expert's...

In this paper, we experimentally test skewness preferences at the individual level. Several prospects that can be ordered with respect to the third-degree stochastic dominance criterion are ranked by the participants of the experiment. We find that the skewness of a distribution has a...

Credence goods, such as car repairs or medical services, are characterized by severe informational asymmetries between sellers and consumers, leading to fraud in the form of provision of insufficient service (undertreatment), provision of unnecessary service (overtreatment) and charging too much...

It is shown that in the framework of prospect theory, the combination of mental accounting and loss aversion can fundamentally change the way individuals evaluate risky alternatives. This finding is then applied in a market setting: parimutuel betting markets. In parimutuel betting markets it...