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Preference for randomization: Empirical and experimental evidence

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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.
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Suggested Citation

  • Dwenger, Nadja & Kübler, Dorothea & Weizsäcker, Georg, 2013. "Preference for randomization: Empirical and experimental evidence," Discussion Papers, Research Unit: Market Behavior SP II 2013-201, WZB Berlin Social Science Center.
  • Handle: RePEc:zbw:wzbmbh:spii2013201
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    1. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    2. 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.
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    8. 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.
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. Kaito Sato, 2011. "Preference for Randomization and Ambiguity Aversion," Discussion Papers 1524, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. 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.

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    More about this item

    JEL classification:

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

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