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An Experimental Note on the Allais Paradox and Monetary Incentives

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  • Burke, Michael S, et al
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    Abstract

    We test whether violations of expected utility theory in an Allais-paradox environment are sensitive to monetary incentives. Like Harrison (1994), we find that violations are significantly reduced when lotteries are real rather than hypothetical. Coauthors are John R. Carter, Robert D. Gominiak, and Daniel F. Ohl.

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    Bibliographic Info

    Article provided by Springer in its journal Empirical Economics.

    Volume (Year): 21 (1996)
    Issue (Month): 4 ()
    Pages: 617-32

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    Handle: RePEc:spr:empeco:v:21:y:1996:i:4:p:617-32

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    References

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    1. Camerer, Colin F, 1989. " An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
    2. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
    3. Wilcox, Nathaniel T, 1993. "Lottery Choice: Incentives, Complexity and Decision Time," Economic Journal, Royal Economic Society, vol. 103(421), pages 1397-1417, November.
    4. Smith, Vernon L, 1989. "Theory, Experiment and Economics," Journal of Economic Perspectives, American Economic Association, vol. 3(1), pages 151-69, Winter.
    5. Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. " Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
    6. Harrison, Glenn W, 1994. "Expected Utility Theory and the Experimentalists," Empirical Economics, Springer, vol. 19(2), pages 223-53.
    7. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-54, Summer.
    8. Harrison, Glenn W, 1989. "Theory and Misbehavior of First-Price Auctions," American Economic Review, American Economic Association, vol. 79(4), pages 749-62, September.
    9. Conlisk, John, 1989. "Three Variants on the Allais Example," American Economic Review, American Economic Association, vol. 79(3), pages 392-407, June.
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    Cited by:
    1. Steffen Huck & Wieland Müller, 2012. "Allais for all: Revisiting the paradox in a large representative sample," Journal of Risk and Uncertainty, Springer, vol. 44(3), pages 261-293, June.
    2. Andersen, Steffen & Harrison, Glenn W. & Lau, Morten Igel & Rutström, Elisabet E., 2010. "Behavioral econometrics for psychologists," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 553-576, August.
    3. Glenn W. Harrison & J. Todd Swarthout, 2012. "The Independence Axiom and the Bipolar Behaviorist," Experimental Economics Center Working Paper Series 2012-01, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    4. Simone Cerreia-Vioglio & David Dillenberger & Pietro ortoleva, 2013. "Cautious Expected Utility and the Certainty Effect," Working Papers 488, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. Ferdinand Vieider, 2011. "Separating real incentives and accountability," Experimental Economics, Springer, vol. 14(4), pages 507-518, November.
    6. Fan, Chinn-Ping, 2002. "Allais paradox in the small," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 411-421, November.

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