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Valuing a Risky Prospect Less than Its Worst Outcome: Uncertainty Effect or Task Ambiguity?

Author

Listed:
  • Andreas Ortmann
  • Sasha Prokosheva
  • Ondrej Rydval
  • Ralph Hertwig

Abstract

Gneezy, List and Wu [Q. J. Econ. 121 (2006) 1283-1309] document that lotteries are often valued less than the lotteries’ worst outcomes. We show how to undo this result.

Suggested Citation

  • Andreas Ortmann & Sasha Prokosheva & Ondrej Rydval & Ralph Hertwig, 2007. "Valuing a Risky Prospect Less than Its Worst Outcome: Uncertainty Effect or Task Ambiguity?," CERGE-EI Working Papers wp334, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp334
    as

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    File URL: http://www.cerge-ei.cz/pdf/wp/Wp334.pdf
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    References listed on IDEAS

    as
    1. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    2. Uri Gneezy & John A. List & George Wu, 2006. "The Uncertainty Effect: When a Risky Prospect is Valued Less than its Worst Possible Outcome," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1283-1309.
    3. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
    4. Glenn Harrison, 2005. "Field experiments and control," Artefactual Field Experiments 00057, The Field Experiments Website.
    5. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    6. Rydval, Ondrej & Ortmann, Andreas, 2004. "How financial incentives and cognitive abilities affect task performance in laboratory settings: an illustration," Economics Letters, Elsevier, vol. 85(3), pages 315-320, December.
    7. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
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    Citations

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    Cited by:

    1. Yitong Wang & Tianjun Feng & L. Keller, 2013. "A further exploration of the uncertainty effect," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 291-310, December.

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    More about this item

    Keywords

    Risky choice; framing; experiments; task ambiguity; subject confusion.;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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