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The relevance of irrelevant alternatives

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  • Kroll, Eike Benjamin
  • Vogt, Bodo

Abstract

In an experimental setting, subjects face a standard elicitation task for certainty equivalents. We show that when a third, objectively irrelevant, option is added to the standard task, the willingness to take risks increases.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 115 (2012)
Issue (Month): 3 ()
Pages: 435-437

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Handle: RePEc:eee:ecolet:v:115:y:2012:i:3:p:435-437

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

Related research

Keywords: Decision under risk; Expected utility theory; Irrelevant alternative; Lottery choice;

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References

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  1. David J. Butler & Graham C. Loomes, 2007. "Imprecision as an Account of the Preference Reversal Phenomenon," American Economic Review, American Economic Association, vol. 97(1), pages 277-297, March.
  2. Simonson, Itamar, 1989. " Choice Based on Reasons: The Case of Attraction and Compromise Effects," Journal of Consumer Research, University of Chicago Press, vol. 16(2), pages 158-74, September.
  3. Seidl, Christian, 2002. " Preference Reversal," Journal of Economic Surveys, Wiley Blackwell, vol. 16(5), pages 621-55, December.
  4. Doron Sonsino, 2010. "The irrelevant-menu affect on valuation," Experimental Economics, Springer, vol. 13(3), pages 309-333, September.
  5. Grether, David M & Plott, Charles R, 1979. "Economic Theory of Choice and the Preference Reversal Phenomenon," American Economic Review, American Economic Association, vol. 69(4), pages 623-38, September.
  6. Tversky, Amos & Thaler, Richard H, 1990. "Anomalies: Preference Reversals," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 201-11, Spring.
  7. Slovic, Paul & Lichtenstein, Sarah, 1983. "Preference Reversals: A Broader Perspective," American Economic Review, American Economic Association, vol. 73(4), pages 596-605, September.
  8. Loomes, Graham & Sugden, Robert, 1987. "Some implications of a more general form of regret theory," Journal of Economic Theory, Elsevier, vol. 41(2), pages 270-287, April.
  9. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-24, December.
  10. Payne, John W & Bettman, James R & Schkade, David A, 1999. "Measuring Constructed Preferences: Towards a Building Code," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 243-70, December.
  11. Roth, Alvin E., 1977. "Independence of irrelevant alternatives, and solutions to Nash's bargaining problem," Journal of Economic Theory, Elsevier, vol. 16(2), pages 247-251, December.
  12. Robin Cubitt, 2005. "Experiments and the domain of economic theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(2), pages 197-210.
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