IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v109y2019i10p3437-74.html
   My bibliography  Save this article

Failures in Contingent Reasoning: The Role of Uncertainty

Author

Listed:
  • Alejandro Martínez-Marquina
  • Muriel Niederle
  • Emanuel Vespa

Abstract

We propose a new channel to account for the difficulties of individuals with contingent reasoning: the presence of uncertainty. When moving from an environment with one state of known value to one with multiple possible values, two changes occur. First, the number of values to consider increases. Second, the value of the state is uncertain. We show in an experiment that this lack of certainty, or the loss of the Power of Certainty, impedes payoff maximization and that it accounts for a substantial portion of the difficulties with contingent reasoning.

Suggested Citation

  • Alejandro Martínez-Marquina & Muriel Niederle & Emanuel Vespa, 2019. "Failures in Contingent Reasoning: The Role of Uncertainty," American Economic Review, American Economic Association, vol. 109(10), pages 3437-3474, October.
    • Handle: RePEc:aea:aecrev:v:109:y:2019:i:10:p:3437-74
    Note: DOI: 10.1257/aer.20171764
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aer.20171764
    Download Restriction: no
    File URL: https://www.aeaweb.org/content/file?id=10683
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20171764.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20171764.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:109:y:2019:i:10:p:3437-74. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.