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Reducing the Reluctance to Exchange Gambles

  • Michal Maimaran

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    Bar-Hillel and Neter (1996) found that although people are willing to trade identical objects, they are reluctant to trade identical lottery tickets. Is this simply due to the fact that these are gambles? It was found that if the value of the tickets is guaranteed to be ex-post, not just ex ante, identical, people are more willing to exchange them. Indeed, just the possibility of ex-post difference between the lottery tickets induces as much reluctance to exchange them as when ex-post difference is guaranteed. In addition, this study examines how the vividness of lottery tickets influences the willingness to trade them. Specifically, it examines whether people are equally reluctant to exchange lottery tickets (when given a bonus for doing so) when they cannot even distinguish between them (e.g., when the tickets are concealed in envelopes). When one cannot see the ticket, it is less vivid and it is harder to imagine it winning. Indeed, it was found that people are more willing to exchange when they cannot distinguish between the tickets than when they can.

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    File URL: http://ratio.huji.ac.il/sites/default/files/publications/dp341.pdf
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    Paper provided by The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem in its series Discussion Paper Series with number dp341.

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    Length: 10 pages
    Date of creation: Oct 2003
    Date of revision:
    Publication status: Published in Judgment and Decision Making, 6(2), 147-155
    Handle: RePEc:huj:dispap:dp341
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    1. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
    2. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
    3. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
    4. Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-84, December.
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