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Preference for randomization: Empirical and experimental evidence

Author

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  • Dwenger, Nadja
  • Kübler, Dorothea
  • Weizsäcker, Georg

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

  • Dwenger, Nadja & Kübler, Dorothea & Weizsäcker, Georg, 2013. "Preference for randomization: Empirical and experimental evidence," SFB 649 Discussion Papers 2013-004, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2013-004
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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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