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Are bygones bygones?

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  • Robin Cubitt

    (School of Economics, University of Nottingham)

  • Maria Ruiz-Martos

    (School of Economics, University of Nottingham)

  • Chris Starmer

    (School of Economics, University of Nottingham)

Abstract

The paper reports an experiment which tests the principle of separability, i.e. that behaviour in a dynamic choice problem is independent of history and of unreachable eventualities. Although this is a standard principle of decision theory, it can be questioned on grounds suggested by non-expected utility models of choice under risk and by the psychology of affective influences on risk-taking. Our experimental design, which provides between-subjects tests of separability using three treatments in which the history preceding a decision is manipulated, is inspired by these concerns. But, we find no significant evidence of violation of separability.

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Bibliographic Info

Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2005-21.

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Date of creation: Nov 2005
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Handle: RePEc:not:notcdx:2005-21

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Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
Phone: (44) 0115 951 5620
Fax: (0115) 951 4159
Web page: http://www.nottingham.ac.uk/economics/cedex/
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Related research

Keywords: Separability; history-independence; non-expected utility; risk and affect;

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References

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  1. Michèle Cohen & Johanna Etner & Meglena Jeleva, 2008. "Dynamic Decision Making when Risk Perception Depends on Past Experience," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00211942, HAL.
  2. George Loewenstein, Ted O'Donoghue and Matthew Rabin., 2000. "Projection Bias in Predicting Future Utility," Economics Working Papers, University of California at Berkeley E00-284, University of California at Berkeley.
  3. Graham Loomes, 2005. "Modelling the Stochastic Component of Behaviour in Experiments: Some Issues for the Interpretation of Data," Experimental Economics, Springer, vol. 8(4), pages 301-323, December.
  4. Thierry Post & Martijn J. van den Assem & Guido Baltussen & Richard H. Thaler, 2008. "Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show," American Economic Review, American Economic Association, vol. 98(1), pages 38-71, March.
  5. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
  6. repec:hal:journl:halshs-00211942 is not listed on IDEAS
  7. Robin Cubitt & Chris Starmer & Robert Sugden, 2001. "Discovered preferences and the experimental evidence of violations of expected utility theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 8(3), pages 385-414.
  8. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
  9. Cubitt, Robin P & Sugden, Robert, 2001. " Dynamic Decision-Making under Uncertainty: An Experimental Investigation of Choices between Accumulator Gambles," Journal of Risk and Uncertainty, Springer, vol. 22(2), pages 103-28, March.
  10. Robin Cubitt & Chris Starmer & Robert Sugden, 1998. "On the Validity of the Random Lottery Incentive System," Experimental Economics, Springer, vol. 1(2), pages 115-131, September.
  11. Joseph Johnson & Jerome Busemeyer, 2001. "Multiple-Stage Decision-Making: The Effect of Planning Horizon Length on Dynamic Consistency," Theory and Decision, Springer, vol. 51(2), pages 217-246, December.
  12. Cubitt, Robin P & Starmer, Chris & Sugden, Robert, 1998. "Dynamic Choice and the Common Ratio Effect: An Experimental Investigation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(450), pages 1362-80, September.
  13. Loomes, Graham & Sugden, Robert, 1998. "Testing Different Stochastic Specifications of Risky Choice," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 65(260), pages 581-98, November.
  14. Loewenstein, George & Adler, Daniel, 1995. "A Bias in the Prediction of Tastes," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 105(431), pages 929-37, July.
  15. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-54, Summer.
  16. Beattie, Jane & Loomes, Graham, 1997. "The Impact of Incentives upon Risky Choice Experiments," Journal of Risk and Uncertainty, Springer, vol. 14(2), pages 155-68, March.
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