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Mathematics self-confidence and the "prepayment effect" in riskless choices

Author

Listed:
  • Lian Xue

    (University of East Anglia)

  • Stefania Sitzia

    (University of East Anglia)

  • Theodore L. Turocy

    (University of East Anglia)

Abstract

We extend the analysis of a riskless choice experiment reported recently by Hochman et al. (2014). Participants select from among sets of standard playing cards valued by a simple formula. In some sessions, participants are given a prepayment associated with some of the cards, which need not be the earnings-maximizing ones. Hochman et al. find that participants choose an earnings-maximizing card less frequently when another card is prepaid. We replicate this result under the original instructions, but not with instructions which explain the payment process more explicitly. Participants who state they do not consider themselves good at mathematics make earnings-maximizing choices much less frequently. Prior experience with economics experiments in general improves performance only modestly. The results suggest that even when comparisons among choices require only simple quantitative reasoning steps, market designers and regulators may need to pay close attention to how the terms of offers are expressed, explained, and implemented.

Suggested Citation

  • Lian Xue & Stefania Sitzia & Theodore L. Turocy, 2016. "Mathematics self-confidence and the "prepayment effect" in riskless choices," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 15-20R, School of Economics, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:wcbess:15-20r
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    1. Subhasish M. Chowdhury & Anwesha Mukherjee & Theodore L. Turocy, 2020. "That’s the ticket: explicit lottery randomisation and learning in Tullock contests," Theory and Decision, Springer, vol. 88(3), pages 405-429, April.

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    More about this item

    Keywords

    loss aversion; prepayment; replication; mathematics self-confidence; lab rats;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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