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Valuing A Risky Prospect Less Than Its Worst Outcome: Uncertainty Effect or Task Ambiguity?

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Author Info

  • Andreas Ortmann

    ()
    (Center for Economic Research and Graduate Education, Charles University, and Economics Institute, Academy of Sciences of the Czech Republic (CERGE-EI).)

  • Alexandra Prokosheva

    (Center for Economic Research and Graduate Education, Charles University, and Economics Institute, Academy of Sciences of the Czech Republic (CERGE-EI).)

  • Ondrej Rydval

    (Max-Planck-Institute of Economics (Strategic Interaction Group), Jena, Germany)

  • Ralph Hertwig

    (University of Basel, Switzerland)

Abstract

Gneezy, List and Wu [Q. J. Econ. 121 (2006) 1283-1309] document that lotteries are often valued less than the lotteries’ worst outcomes. We show how to undo this result.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2007-038.

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Date of creation: 18 Jul 2007
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Handle: RePEc:jrp:jrpwrp:2007-038

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Keywords: Risky choice; framing; experiments; task ambiguity; subject confusion;

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  1. 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, vol. 121(4), pages 1283-1309, November.
  2. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
  3. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
  4. Ondrej Rydval & Andreas Ortmann, 2004. "How financial incentives and cognitive abilities affect task performance in laboratory settings: An illustration," CERGE-EI Working Papers wp221, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
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