Citation

Vieider FM. Am. Econ. Rev. 2018; 108(8): 2366-2382.

Copyright

(Copyright © 2018, American Economic Association)

DOI

10.1257/aer.20160789

PMID

unavailable

Abstract

In this comment on Callen et al. (2014), I revisit recent evidence uncovering a "preference for certainty" in violation of dominant normative and descriptive theories of decision-making under risk. I show that the empirical findings are potentially confounded by systematic noise. I then develop choice lists that allow me to disentangle these different explanations. Experimental results obtained with these lists reject explanations based on a preference for certainty in favor of explanations based on random choice. From a theoretical point of view, the levels of risk aversion detected in the choice list involving certainty can be accounted for by prospect theory through reference dependence activated by salient outcomes.

Language: en

Keywords

Alliances; Conflict Resolution; Institutional Arrangements; Relation of Economics to Other Disciplines, Design of Experiments: Laboratory, Individual, Consumer Economics: Empirical Analysis, Conflict; Revolutions, Criteria for Decision-Making under Risk and Uncertainty, Microeconomic Analyses of Economic Development, Formal and Informal Sectors; Shadow Economy