Money Does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse
AbstractIf payoffs are tickets for binary lotteries, which involve only two money prizes, then rationality requires expected value maximization in tickets. This payoff scheme was increasingly used to induce risk neutrality in experiments. The experiment presented here involved lottery choice and valuation tasks. One subject group was paid in binary lottery tickets, another directly in money. significantly greater deviations from risk neutral behavior are observed with binary lottery payoffs. This discrepancy increases when sujects have easy access to the alternatives' expected values and mean absolute deviations. Behavioral regularities are observed at least as often as with direct money payoffs.
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Bibliographic InfoArticle provided by Springer in its journal Theory and Decision.
Volume (Year): 46 (1999)
Issue (Month): 3 (June)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100341
Binary lottery payoffs; Choices under risk; Risk preferences; Design of experiments; Experimental economics;
Other versions of this item:
- Selten, Reinhard & Abdolkarim Sadrieh & Klaus Abbink, 1995. "Money does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse," Discussion Paper Serie B 343, University of Bonn, Germany.
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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