How Certain is the Uncertainty Effect?
CERGE-EI Working Paper no. 385
41 Pages Posted: 12 Aug 2009
Date Written: July 1, 2009
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. While the authors implemented a verbal lottery description, we use a physical lottery format which makes misinterpretation of the lottery structure highly unlikely. We also provide subjects with complete information about the goods they are to value (book gift certificates and one-year deferred payments). Contrary to Gneezy et al. (2006), we observe for all three pricing tasks that subjects’ willingness to pay for the lottery is significantly higher than other subjects’ willingness to pay for the lottery’s worse outcome.
Note: Downloadable document is in Czech.
Keywords: Decision under risk, framing, experiments, task ambiguity
JEL Classification: C81, C91, C93, D83
Suggested Citation: Suggested Citation
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