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Valuing A Risky Prospect Less Than Its Worst Outcome: Uncertainty Effect or Task Ambiguity?

Author

Listed:
  • Andreas Ortmann

    () (Center for Economic Research and Graduate Education, Charles University, and Economics Institute, Academy of Sciences of the Czech Republic (CERGE-EI).)

  • Alexandra Prokosheva

    (Center for Economic Research and Graduate Education, Charles University, and Economics Institute, Academy of Sciences of the Czech Republic (CERGE-EI).)

  • Ondrej Rydval

    (Max-Planck-Institute of Economics (Strategic Interaction Group), Jena, Germany)

  • Ralph Hertwig

    (University of Basel, Switzerland)

Abstract

Gneezy, List and Wu [Q. J. Econ. 121 (2006) 1283-1309] document that lotteries are often valued less than the lotteries’ worst outcomes. We show how to undo this result.

Suggested Citation

  • Andreas Ortmann & Alexandra Prokosheva & Ondrej Rydval & Ralph Hertwig, 2007. "Valuing A Risky Prospect Less Than Its Worst Outcome: Uncertainty Effect or Task Ambiguity?," Jena Economic Research Papers 2007-038, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2007-038
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    References listed on IDEAS

    as
    1. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    2. 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.
    3. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
    4. Rydval, Ondrej & Ortmann, Andreas, 2004. "How financial incentives and cognitive abilities affect task performance in laboratory settings: an illustration," Economics Letters, Elsevier, vol. 85(3), pages 315-320, December.
    5. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Yitong Wang & Tianjun Feng & L. Keller, 2013. "A further exploration of the uncertainty effect," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 291-310, December.

    More about this item

    Keywords

    Risky choice; framing; experiments; task ambiguity; subject confusion;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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