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The Relationship Between Risk Attitudes and Heuristics in Search Tasks: A Laboratory Experiment

  • Schunk, Daniel
  • Winter, Joachim

Experimental studies of search behavior suggest that individuals stop searching earlier than predicted by the optimal, risk-neutral stopping rule. Such behavior could be generated by two different classes of decision rules: rules that are optimal conditional on utility functions departing from risk neutrality, or heuristics derived from limited cognitive processing capacities and satisfycing. To discriminate among these two possibilities, we conduct an experiment that consists of a standard search task as well as a lottery task designed to elicit utility functions. We find that search heuristics are not related to measures of risk aversion, but to measures of loss aversion.

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Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 1377.

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Date of creation: Feb 2007
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Handle: RePEc:lmu:muenec:1377
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