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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References listed on IDEAS
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- Steffen Anderson & Glenn Harrison & Morten Lau & Rutstrom Elisabet, 2007. "Valuation using multiple price list formats," Applied Economics, Taylor & Francis Journals, vol. 39(6), pages 675-682.
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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.
- 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, Oxford University Press, vol. 121(4), pages 1283-1309.
- Grether, David M. & Plott, Charles R., .
"Economic Theory of Choice and the Preference Reversal Phenomenon,"
152, California Institute of Technology, Division of the Humanities and Social Sciences.
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- repec:feb:framed:0074 is not listed on IDEAS
- Horowitz, John K., 2006. "The Becker-DeGroot-Marschak mechanism is not necessarily incentive compatible, even for non-random goods," Economics Letters, Elsevier, vol. 93(1), pages 6-11, October.
- Glenn W Harrison & John A List & Charles Towe, 2007.
"Naturally Occurring Preferences and Exogenous Laboratory Experiments: A Case Study of Risk Aversion,"
Econometric Society, vol. 75(2), pages 433-458, 03.
- Charles Towe & Glenn Harrison & John List, 2004. "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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