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Preference for Randomization: Empirical and Experimental Evidence

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  • Nadja Dwenger
  • Dorothea Kübler
  • Georg Weizsäcker

Abstract

We investigate violations of consequentialism in the form of the stochastic dominance property. The property is shared by many theories of choice and implies that the decision-maker prefers receiving the best outcome for sure over all lotteries that involve multiple outcomes. We run experiments to demonstrate that dominated randomization can be attractive. In treatments where decision-makers are asked to submit multiple decisions without knowing which one is relevant, many participants submit contradictory sets of decisions and thereby induce a dominated lottery between outcomes. Explicit choice of non-consequentialist randomization is observed in a separate treatment. A possible reason for the e ect is the desire to avoid having to make the decision. A large data set on (high-stake) university applications in Germany shows patterns that are consistent with a preference for randomization.

Suggested Citation

  • Nadja Dwenger & Dorothea Kübler & Georg Weizsäcker, 2013. "Preference for Randomization: Empirical and Experimental Evidence," SFB 649 Discussion Papers SFB649DP2013-004, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    • Handle: RePEc:hum:wpaper:sfb649dp2013-004
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    References listed on IDEAS

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    1. Braun Sebastian & Dwenger Nadja & Kübler Dorothea, 2010. "Telling the Truth May Not Pay Off: An Empirical Study of Centralized University Admissions in Germany," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-38, March.
    2. Berg, Joyce E. & Dickhaut, John W. & Rietz, Thomas A., 2010. "Preference reversals: The impact of truth-revealing monetary incentives," Games and Economic Behavior, Elsevier, vol. 68(2), pages 443-468, March.
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    4. Sebastian Braun & Nadja Dwenger, 2008. "Success in the University Admission Process in Germany: Regional Provenance Matters," Discussion Papers of DIW Berlin 789, DIW Berlin, German Institute for Economic Research.
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    13. Elliott Peranson & Alvin E. Roth, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, American Economic Association, vol. 89(4), pages 748-780, September.
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    Cited by:

    1. Kaito Sato, 2011. "Preference for Randomization and Ambiguity Aversion," Discussion Papers 1524, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Poeschel, Friedrich, 2012. "Assortative matching through signals," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62061, Verein für Socialpolitik / German Economic Association.
    3. Christoph Kuzmics & Brian W. Rogers & Xiannong Zhang, 2019. "Is Ellsberg behavior evidence of ambiguity aversion?," Graz Economics Papers 2019-07, University of Graz, Department of Economics.
    4. Ryan Kendall, 2017. "Aligning Democracy: A Comment on Bruno S. Frey’s “Proposals for a Democracy of the Future”," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(2), pages 243-251, November.

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    More about this item

    Keywords

    Stochastic dominance violations; individual decision making; university choice; matching;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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