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Revealing a preference for mixtures: An experimental study of risk

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  • Paul Feldman
  • John Rehbeck

Abstract

Using a revealed preference approach, we conduct an experiment where subjects make choices from linear convex budgets in the domain of risk. We find that many individuals prefer mixtures of lotteries in ways that systematically rule out expected utility behavior. We explore the extent to which an individual's preference to choose mixtures is related to a preference for randomization by comparing choices from a convex choice task to the decisions made in a repeated discrete choice task. We find that a preference to mix is positively correlated with behavior from repeated discrete choice tasks.

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  • Paul Feldman & John Rehbeck, 2022. "Revealing a preference for mixtures: An experimental study of risk," Quantitative Economics, Econometric Society, vol. 13(2), pages 761-786, May.
    • Handle: RePEc:wly:quante:v:13:y:2022:i:2:p:761-786
    DOI: 10.3982/QE1694
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    References listed on IDEAS

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