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Low-probability rational spillovers

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  • Kivi, Paul A.
  • Shogren, Jason F.

Abstract

We find evidence of "rationality spillovers" in low-probability high-severity risks. People adjust their valuation of high probability events and preferences as they reduce preference reversals. We find insensitivity to scope for food safety illnesses with the lowest probabilities.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 110 (2011)
Issue (Month): 1 (January)
Pages: 25-27

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Handle: RePEc:eee:ecolet:v:110:y:2011:i:1:p:25-27

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Rationality Low-probability Preference reversals Arbitrage;

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  1. McClelland, Gary H & Schulze, William D & Coursey, Don L, 1993. " Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 95-116, August.
  2. Todd L. Cherry & Thomas Crocker & Jason F. Shogren, 2001. "Rationality Spillovers," Working Papers 01-02, Department of Economics, Appalachian State University.
  3. Arrow, Kenneth J, 1986. "Rationality of Self and Others in an Economic System," The Journal of Business, University of Chicago Press, vol. 59(4), pages S385-99, October.
  4. Settle Chad & Shogren Jason F, 2006. "Does Integrating Economic and Biological Systems Matter for Public Policy? The Case of Yellowstone Lake," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-48, July.
  5. Hayes, Dermot J. & Shogren, Jason F. & Shin, Seung Youll & Kliebenstein, James, 1995. "Valuing Food Safety in Experimental Auction Markets," Staff General Research Papers 835, Iowa State University, Department of Economics.
  6. Chu, Yun-Peng & Chu, Ruey-Ling, 1990. "The Subsidence of Preference Reversals in Simplified and Marketlike Experimental Settings: A Note," American Economic Review, American Economic Association, vol. 80(4), pages 902-11, September.
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