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The role of Expected Value illustrated in decision-making under risk: single-play vs multiple-play

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  • Shu Li

Abstract

The present research on risky decision making extends the exploration of the singleplay/multiple-play distinction. Mathematics students are asked to respond to two choice problems, each having three decision tasks: choosing between multiple-play gambles, choosing between single-play gambles and matching paired possible outcomes. It is shown that the generalized model of Expected Utility (EU) theory appears to be redundant for the multiple-play situation, given that the simpler Expected Value (EV) theory correctly predicts the observed behaviour, and in the single-play situation it appears to be predictively inadequate. The observed choices in single-play situations could be better accounted for by the equate-to-differentiate approach revealed by the matching data. The overall results suggest that the long-run and short-run perspectives are in fact so utterly different that the short-run one is perhaps not based on any kind of expectation rule.

Suggested Citation

  • Shu Li, 2003. "The role of Expected Value illustrated in decision-making under risk: single-play vs multiple-play," Journal of Risk Research, Taylor & Francis Journals, vol. 6(2), pages 113-124, March.
    • Handle: RePEc:taf:jriskr:v:6:y:2003:i:2:p:113-124
    DOI: 10.1080/1366987032000078893
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    Cited by:

    1. Arpan Jani, 2021. "An agent-based model of repeated decision making under risk: modeling the role of alternate reference points and risk behavior on long-run outcomes," Journal of Business Economics, Springer, vol. 91(9), pages 1271-1297, November.
    2. Michael L. DeKay & Dan R. Schley & Seth A. Miller & Breann M. Erford & Jonghun Sun & Michael N. Karim & Mandy B. Lanyon, 2016. "The persistence of common-ratio effects in multiple-play decisions," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 11(4), pages 361-379, July.
    3. Michael L. DeKay, 2011. "Are Medical Outcomes Fungible? A Survey of Voters, Medical Administrators, and Physicians," Medical Decision Making, , vol. 31(2), pages 338-353, March.
    4. Gary Colbert & Dennis Murray & Robert Nieschwietz, 2009. "The use of expected value in pricing judgments," Journal of Risk Research, Taylor & Francis Journals, vol. 12(2), pages 199-208, March.
    5. repec:cup:judgdm:v:11:y:2016:i:4:p:361-379 is not listed on IDEAS
    6. repec:cup:judgdm:v:1:y:2006:i::p:134-145 is not listed on IDEAS
    7. Michael L. DeKay & John C. Hershey & Mark D. Spranca, & Peter A. Ubel & David A. Asch, 2006. "Are medical treatments for individuals and groups like single-play and multiple-play gambles?," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 1, pages 134-145, November.

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