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Uncertainty effect revisited using physical lottery format

Author

Listed:
  • Ondrej Rydval

    (Max Planck Institute of Economics, Jena, Germany, and CERGE-EI, Prague, Czech Republic)

  • Andreas Ortmann

    (CERGE-EI (a joint workplace of the Center for Economic Research and Graduate Education, Charles University, and the Economics Institute of the Academy of Sciences of the Czech Republic), Prague, Czech Republic)

  • Sasha Prokosheva

    (CERGE-EI (a joint workplace of the Center for Economic Research and Graduate Education, Charles University, and the Economics Institute of the Academy of Sciences of the Czech Republic), Prague, Czech Republic)

  • Ralph Hertwig

    (University of Basel, Switzerland)

Abstract

We replicate three pricing tasks of Gneezy, List and Wu (2006) for which they document the so called uncertainty effect, namely that people value a binary lottery over non-monetary outcomes less than other people value the lottery's worse outcome. Unlike the authors who implement a verbal lottery description, we use a physical lottery format which rules out any misinterpretation of the lottery structure. Contrary to Gneezy, List and Wu, we systematically observe that subjects' willingness to pay for the lottery is significantly higher than other subjects' willingness to pay for the lottery’s worse outcome.

Suggested Citation

  • Ondrej Rydval & Andreas Ortmann & Sasha Prokosheva & Ralph Hertwig, 2009. "Uncertainty effect revisited using physical lottery format," Jena Economics Research Papers 2009-002, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2009-002
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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2009/wp_2009_002.pdf
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    More about this item

    Keywords

    Risky choice; framing; experiments; task ambiguity;
    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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