Preference for Randomization: Empirical and Experimental Evidence
AbstractWe investigate violations of consequentialism in the form of the stochastic dominance property. The property is shared by many theories of choice and implies that the decision-maker prefers receiving the best outcome for sure over all lotteries that involve multiple outcomes. We run experiments to demonstrate that dominated randomization can be attractive. In treatments where decision-makers are asked to submit multiple decisions without knowing which one is relevant, many participants submit contradictory sets of decisions and thereby induce a dominated lottery between outcomes. Explicit choice of non-consequentialist randomization is observed in a separate treatment. A possible reason for the e ect is the desire to avoid having to make the decision. A large data set on (high-stake) university applications in Germany shows patterns that are consistent with a preference for randomization.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2013-004.
Length: 36 pages
Date of creation: Jan 2013
Date of revision:
Stochastic dominance violations; individual decision making; university choice; matching;
Other versions of this item:
- Dwenger, Nadja & Kübler, Dorothea & Weizsäcker, Georg, 2013. "Preference for randomization: Empirical and experimental evidence," Discussion Papers, Research Unit: Market Behavior SP II 2013-201, Social Science Research Center Berlin (WZB).
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-19 (All new papers)
- NEP-CBE-2013-01-19 (Cognitive & Behavioural Economics)
- NEP-EXP-2013-01-19 (Experimental Economics)
- NEP-UPT-2013-01-19 (Utility Models & Prospect Theory)
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