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An Experimental Analysis of the Prize–Probability Trade-Off in Stopping Problems

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  • Yair Antler

    (Tel Aviv University)

  • Ayala Arad

    (Tel Aviv University)

Abstract

We experimentally examine how individuals commit to a cutoff stopping rule when facing a sequence of independent lotteries. We identify two main behavior patterns: (a) a small share of participants consistently choose stopping rules whose gain bound (i.e., the accumulated gain at which the sequence stops) is larger than the loss bound, and (b) a larger share of participants consistently choose rules whose loss bound is larger than the gain bound. We introduce a procedural choice model that accounts for these patterns and show that the behavior of most of our participants is inconsistent with prominent theories of decision under risk.

Suggested Citation

  • Yair Antler & Ayala Arad, 2025. "An Experimental Analysis of the Prize–Probability Trade-Off in Stopping Problems," The Review of Economics and Statistics, MIT Press, vol. 107(6), pages 1588-1602, November.
    • Handle: RePEc:tpr:restat:v:107:y:2025:i:6:p:1588-1602
    DOI: 10.1162/rest_a_01366
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