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Low-probability rational spillovers

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  • Kivi, Paul A.
  • Shogren, Jason F.

Abstract

We find evidence of "rationality spillovers" in low-probability high-severity risks. People adjust their valuation of high probability events and preferences as they reduce preference reversals. We find insensitivity to scope for food safety illnesses with the lowest probabilities.

Suggested Citation

  • Kivi, Paul A. & Shogren, Jason F., 2011. "Low-probability rational spillovers," Economics Letters, Elsevier, vol. 110(1), pages 25-27, January.
  • Handle: RePEc:eee:ecolet:v:110:y:2011:i:1:p:25-27
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    References listed on IDEAS

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    1. Dermot J. Hayes & Jason F. Shogren & Seung Youll Shin & James B. Kliebenstein, 1995. "Valuing Food Safety in Experimental Auction Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 40-53.
    2. Chu, Yun-Peng & Chu, Ruey-Ling, 1990. "The Subsidence of Preference Reversals in Simplified and Marketlike Experimental Settings: A Note," American Economic Review, American Economic Association, vol. 80(4), pages 902-911, September.
    3. McClelland, Gary H & Schulze, William D & Coursey, Don L, 1993. "Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 95-116, August.
    4. Cherry, Todd L. & Crocker, Thomas D. & Shogren, Jason F., 2003. "Rationality spillovers," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 63-84, January.
    5. Arrow, Kenneth J, 1986. "Rationality of Self and Others in an Economic System," The Journal of Business, University of Chicago Press, vol. 59(4), pages 385-399, October.
    6. Settle Chad & Shogren Jason F, 2006. "Does Integrating Economic and Biological Systems Matter for Public Policy? The Case of Yellowstone Lake," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-48, July.
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    Cited by:

    1. McIntosh, Christopher R., 2014. "Preference reversals: experimental review and a new idea for using arbitrage within the double bound dichotomous choice elicitation method," Western Economics Forum, Western Agricultural Economics Association, vol. 13(01).

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