How certain is the uncertainty effect?
We replicate three pricing tasks of Gneezy, List and Wu (2006) for which they document the so-called uncertainty effect, namely, that people value a binary lottery over non-monetary outcomes less than other people value the lottery’s worse outcome. While the authors implemented a verbal lottery description, we use a physical lottery format which makes misinterpretation of the lottery structure highly unlikely. We also provide subjects with complete information about the goods they are to value (book gift certificates and one-year deferred payments). Contrary to Gneezy et al. (2006), we observe for all three pricing tasks that subjects’ willingness to pay for the lottery is significantly higher than other subjects’ willingness to pay for the lottery’s worse outcome.
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Volume (Year): 12 (2009)
Issue (Month): 4 (December)
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"The uncertainty effect: When a risky prospect is valued less than its worst possible outcome,"
Framed Field Experiments
00152, The Field Experiments Website.
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Artefactual Field Experiments
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"Naturally occurring preferences and exogenous laboratory experiments: A case study of risk aversion,"
Framed Field Experiments
00155, The Field Experiments Website.
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