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A review of the certainty effect and influence of information processing

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  • Ramirez, Patrick A.
  • Levine, Daniel S.

Abstract

This review considers two explanations for behavioral decision-making in reference to the certainty and framing effects. The findings from various paradigms such as a single questionnaire, gambles with repetition, and gambles guided by feedback are explained either by prospect theory or by expected utility theory. Finally this review attempts to account for the different findings and offers a possible explanation for the conflicting results by considering the role of experience which in turn can alter how information in processed as described by fuzzy trace theory which is a dual process theory of reasoning.

Suggested Citation

  • Ramirez, Patrick A. & Levine, Daniel S., 2013. "A review of the certainty effect and influence of information processing," Economics Discussion Papers 2013-47, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201347
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    References listed on IDEAS

    as
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    3. Weber, Bethany J. & Chapman, Gretchen B., 2005. "The combined effects of risk and time on choice: Does uncertainty eliminate the immediacy effect? Does delay eliminate the certainty effect?," Organizational Behavior and Human Decision Processes, Elsevier, vol. 96(2), pages 104-118, March.
    4. Sharoni Shafir & Taly Reich & Erez Tsur & Ido Erev & Arnon Lotem, 2008. "Perceptual accuracy and conflicting effects of certainty on risk-taking behaviour," Nature, Nature, vol. 453(7197), pages 917-920, June.
    5. Rakow, Tim & Demes, Kali A. & Newell, Ben R., 2008. "Biased samples not mode of presentation: Re-examining the apparent underweighting of rare events in experience-based choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 106(2), pages 168-179, July.
    6. Daniel K. N. Johnson & Tracy R. Gleason, 2009. "Who REALLY Wants to be a Millionaire? Gender Differences in Game Show Contestant Behavior Under Risk," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 243-261, June.
    7. Joop Hartog & Ada Ferrer‐i‐Carbonell & Nicole Jonker, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
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    More about this item

    Keywords

    expected utility theory; prospect theory; fuzzy trace theory; certainty effect; framing effect;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • Y80 - Miscellaneous Categories - - Related Disciplines - - - Related Disciplines

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