Tests of "Fanning Out" of Indifference Curves: Results from Animal and Human Experiments
AbstractIn an earlier paper (Raymond C. Battalio, John H. Kagel, and Don N. Mac Donald, 1985), we reported Allais-type violations of the independence axiom of expected utility theory with rats choosing over positively valued payoffs (food rewards). This note extends this research, examining animals' choices over losses, testing for (1) standard Allais-type common ratio effect violations of expected utility theory and (2) fanning out of indifference curves for random prospects, tests of Mark J. Machina's (1982, 1987) hypothesis II (hereafter H2), over previously unexplored areas of the unit probability triangle. Results from a parallel series of experiments using human subjects choosing over real losses are also reported. For both rats and people, we find standard Allais-type violations of expected utility theory and a systematic failure of the fanning out hypothesis in the southeast corner of the unit probability triangle, in the case of losses. Thus, the fanning out hypothesis (Machina 1982, 1987) cannot provide a satisfactory explanation for behavioral deviations from expected utility theory.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 80 (1990)
Issue (Month): 4 (September)
Other versions of this item:
- John Kagel & Don MacDonald & Raymond Battalio, 1990. "Tests of 'fanning out' of indifference curves: Results from animal and human experiments," Framed Field Experiments 00165, The Field Experiments Website.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Bruno S. Frey, 2005.
"Knight Fever – Towards an Economics of Awards,"
CESifo Working Paper Series
1468, CESifo Group Munich.
- Bruno S. Frey, 2005. "Knight Fever: Towards an Economics of Awards," CREMA Working Paper Series 2005-12, Center for Research in Economics, Management and the Arts (CREMA).
- Bruno S. Frey, . "Knight Fever towards an Economics of Awards," IEW - Working Papers 239, Institute for Empirical Research in Economics - University of Zurich.
- William T. Harbaugh & Kate Krause & Lise Vesterlund, 1999.
"Risk attitudes of children and adults: choices over small and large probability gains and losses,"
University of Oregon Economics Department Working Papers
1999-2, University of Oregon Economics Department.
- William Harbaugh & Kate Krause & Lise Vesterlund, 2002. "Risk Attitudes of Children and Adults: Choices Over Small and Large Probability Gains and Losses," Experimental Economics, Springer, vol. 5(1), pages 53-84, June.
- Pavlo Blavatskyy, 2004. "Axiomatization of a Preference for Most Probably Winner," CERGE-EI Working Papers wp226, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- E. Elisabet Rutstrom & Glenn W. Harrison & Morten I. Lau, 2004. "Estimating Risk Attitudes in Denmark," Econometric Society 2004 Australasian Meetings 201, Econometric Society.
- Glenn Harrison & John List, 2004.
Artefactual Field Experiments
00058, The Field Experiments Website.
- D. A. Peel & Jie Zhang & D. Law, 2008. "The Markowitz model of utility supplemented with a small degree of probability distortion as an explanation of outcomes of Allais experiments over large and small payoffs and gambling on unlikely outc," Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 17-26.
- M. Keith Chen & Venkat Lakshminarayanan & Laurie Santos, 2005. "The Evolution of Our Preferences: Evidence from Capuchin-Monkey Trading Behavior," Cowles Foundation Discussion Papers 1524, Cowles Foundation for Research in Economics, Yale University.
- Fan, Chinn-Ping, 2002. "Allais paradox in the small," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 411-421, November.
- Thomas Epper & Helga Fehr-Duda, 2012. "The missing link: Unifying risk taking and time discounting," ECON - Working Papers 096, Department of Economics - University of Zurich.
- Starmer, Chris, 1992. "Testing New Theories of Choice under Uncertainty Using the Common Consequence Effect," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 813-30, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.