If 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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Paper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number
343.
Length: pages Date of creation: Dec 1995 Date of revision: Handle: RePEc:bon:bonsfb:343
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Find related papers by JEL classification: 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
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