Anticipated regret and self-esteem in the Allais paradox
AbstractOur experiment aims at studying the impact of self-esteem on risk-prone choices in an Allais-type decision context using hypothetical money. We use an Internet protocol in order to reach a large heterogeneous student population sample. An anticipated regret explanation for the certainty effect implies that self-esteem is a crucial psychological variable in what concerns risky decision, but only when the choice is between a safe option and a risky option. Thus, in our experiment, we hypothesize that low self-esteem people will choose more frequently the safe option (rather than the risky-prone option) than high self-esteem people, whereas low self-esteem and high self-esteem individuals will show the same pattern of choices between two different risk-based options. Our data confirm our hypothesis. Regarding risky choices preferences, we also observe that females, non economists and older people significantly exhibit safer choice preferences than other participants. We find also that men and students in economics are more likely to conform to expected utility theory than females and other social science students respectively. We then discuss what these findings mean for economic regret theory, and suggest that a complete theory of decision-making under risk should introduce both situational and motivational explanations of individual behaviour.
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Bibliographic InfoPaper provided by Groupe de Recherche en Economie Théorique et Appliquée in its series Cahiers du GREThA with number 2011-25.
Date of creation: 2011
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More information through EDIRC
Allais paradox; Risk; Regret aversion; Self-esteem; Internet experiment; Gender differences;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-02 (All new papers)
- NEP-CBE-2011-07-02 (Cognitive & Behavioural Economics)
- NEP-EVO-2011-07-02 (Evolutionary Economics)
- NEP-EXP-2011-07-02 (Experimental Economics)
- NEP-UPT-2011-07-02 (Utility Models & Prospect Theory)
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