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Paying for randomization and indecisiveness

Author

Listed:
  • Qiyan Ong

    (National University of Singapore, VENTUS
    Radboud University)

  • Jianying Qiu

    (Radboud University)

Abstract

We examine preference for randomization, and link it to conflicting preference-led indecisiveness in social settings. In an ultimatum game experiment where receivers may face conflicting preferences between material gains and equity, we allow receivers to assign non-zero probabilities to both acceptance and rejection (the randomized choice) in addition to the standard binary choice of acceptance or rejection. We further elicit receivers’ willingness to pay for using the randomized choice instead of the binary choice. We find that a theoretical model incorporating receivers’ conflicting preferences explains the experimental results well: most receivers randomized actively between acceptance and rejection, and many were willing to pay for randomization. Our results suggest that allowing people to randomize when making choices with conflicting preferences may improve individual welfare.

Suggested Citation

  • Qiyan Ong & Jianying Qiu, 2023. "Paying for randomization and indecisiveness," Journal of Risk and Uncertainty, Springer, vol. 67(1), pages 45-72, August.
    • Handle: RePEc:kap:jrisku:v:67:y:2023:i:1:d:10.1007_s11166-023-09407-1
    DOI: 10.1007/s11166-023-09407-1
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    More about this item

    Keywords

    Indecisiveness; Randomization; Incomplete preference; Preference uncertainty; Imprecision; Conflicting preferences; Ultimatum game;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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