Advanced Search
MyIDEAS: Login to save this paper or follow this series

How Certain Is the Uncertainty Effect?

Contents:

Author Info

  • Ondrej Rydval
  • Andreas Ortmann
  • Sasha Prokosheva
  • Ralph Hertwig

Abstract

We replicate three pricing tasks of Gneezy, List and Wu (2006) for which they document the so-called uncertainty effect, namely, that people value a binary lottery over non-monetary outcomes less than other people value the lottery’s worse outcome. While the authors implemented a verbal lottery description, we use a physical lottery format which makes misinterpretation of the lottery structure highly unlikely. We also provide subjects with complete information about the goods they are to value (book gift certificates and one-year deferred payments). Contrary to Gneezy et al. (2006), we observe for all three pricing tasks that subjects’ willingness to pay for the lottery is significantly higher than other subjects’ willingness to pay for the lottery’s worse outcome.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cerge-ei.cz/pdf/wp/Wp385.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp385.

as in new window
Length:
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:cer:papers:wp385

Contact details of provider:
Postal: P.O. Box 882, Politickych veznu 7, 111 21 Praha 1
Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Email:
Web page: http://www.cerge-ei.cz
More information through EDIRC

Related research

Keywords: Decision under risk; framing; experiments; task ambiguity.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Grether, David M & Plott, Charles R, 1979. "Economic Theory of Choice and the Preference Reversal Phenomenon," American Economic Review, American Economic Association, American Economic Association, vol. 69(4), pages 623-38, September.
  2. Uri Gneezy & John List & George Wu, 2006. "The uncertainty effect: When a risky prospect is valued less than its worst possible outcome," Framed Field Experiments, The Field Experiments Website 00152, The Field Experiments Website.
  3. Harrison, Glenn W. & Rutström, E. Elisabet, 2008. "Experimental Evidence on the Existence of Hypothetical Bias in Value Elicitation Methods," Handbook of Experimental Economics Results, Elsevier, Elsevier.
  4. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments, The Field Experiments Website 00058, The Field Experiments Website.
  5. Glenn Harrison & John List & Charles Towe, 2004. "Naturally occurring preferences and exogenous laboratory experiments: A case study of risk aversion," Framed Field Experiments, The Field Experiments Website 00155, The Field Experiments Website.
  6. repec:feb:framed:0074 is not listed on IDEAS
  7. Horowitz, John K., 2006. "The Becker-DeGroot-Marschak mechanism is not necessarily incentive compatible, even for non-random goods," Economics Letters, Elsevier, Elsevier, vol. 93(1), pages 6-11, October.
  8. Steffen Anderson & Glenn Harrison & Morten Lau & Rutstrom Elisabet, 2007. "Valuation using multiple price list formats," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 39(6), pages 675-682.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Andreas Ortmann, 2009. ""The Way in which an Experiment is Conducted is Unbelievably Important": On the Experimentation Practices of Economists and Psychologists," CESifo Working Paper Series 2887, CESifo Group Munich.
  2. Yitong Wang & Tianjun Feng & L. Keller, 2013. "A further exploration of the uncertainty effect," Journal of Risk and Uncertainty, Springer, Springer, vol. 47(3), pages 291-310, December.
  3. Uri Gneezy & John A List & George Wu, 2006. "The Uncertainty Effect: When a Risky Prospect Is Valued Less Than Its Worst Possible Outcome," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 121(4), pages 1283-1309, November.
  4. George E. Newman & Daniel Mochon, 2012. "Why are lotteries valued less? Multiple tests of a direct risk-aversion mechanism," Judgment and Decision Making, Society for Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(1), pages 19-24, January.
  5. Pavlo Blavatskyy, 2012. "Probabilistic choice and stochastic dominance," Economic Theory, Springer, Springer, vol. 50(1), pages 59-83, May.
  6. Kircher, Philipp & Sandroni, Alvaro & Ludwig, Sandra, 2009. "Fairness: A Critique to the Utilitarian Approach," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 288, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  7. Klaus Glenk & Sergio Colombo, 2013. "Modelling outcome-related risk in choice experiments," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, Australian Agricultural and Resource Economics Society, vol. 57(4), pages 559-578, October.
  8. Andreas C. Drichoutis & Rodolfo M. Nayga & Jayson L. Lusk & Panagiotis Lazaridis, 2012. "When a risky prospect is valued more than its best possible outcome," Judgment and Decision Making, Society for Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(1), pages 1-18, January.
  9. James Andreoni & Charles Sprenger, 2011. "Uncertainty Equivalents: Testing the Limits of the Independence Axiom," NBER Working Papers 17342, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cer:papers:wp385. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jana Koudelkova).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.