I provide a test of narrow framing to explain why individuals turn down small positive expected value lotteries. Participants in a large survey have been asked whether they would accept a small lottery of winning 180 euros with probability of 1/2 or losing 100 euros with the same probability. To half of the sample, randomly selected, the lottery question was asked at the beginning of the interview; the other half made the decision immediately after they were asked to think about and report their subjective probability distribution of future earnings. Consistent with narrow framing, I find that individuals that were induced to bring their earnings risk to mind before facing the decision are signi.cantly less likely to turn it down. Furthemore, only those who actually say they are uncertain about their incomes are less likely to reject the lottery. I show that attitudes towards regret and reliance on intuition rather than reasoning are likely to drive the tendency to frame choices narrowly.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by European University Institute in its series Economics Working Papers with number
ECO2009/02.
Length: Date of creation: 2009 Date of revision: Handle: RePEc:eui:euiwps:eco2009/02
Contact details of provider: Postal: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy Phone: +39-055-4685.982 Fax: +39-055-4685.902 Web page: http://www.eui.eu/ECO/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Marcia Gastaldo).
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.:
Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008.
"Trusting the Stock Market,"
Journal of Finance,
American Finance Association, vol. 63(6), pages 2557-2600, December.
[Downloadable!] (restricted)
Other versions:
Luigi Guiso & Paola Sapienza & Luigi Zingales, 2005.
"Trusting the Stock Market,"
NBER Working Papers
11648, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Haliassos, Michael & Bertaut, Carol C, 1995.
"Why Do So Few Hold Stocks?,"
Economic Journal,
Royal Economic Society, vol. 105(432), pages 1110-29, September.
[Downloadable!] (restricted)