Note on Small Feedback-Based Decisions and Their Limited Correspondence to Description-Based Decisions
CERGE-EI Working Paper No. 218
Posted: 24 Apr 2005
Date Written: October 2003
Abstract
Barron and Erev (2003) report experimental results revealing differences in risk attitude in small feedback-based problems as opposed to conventional description-based problems. This note shows that theoretical predictions drawing on a simple decision rule, known as the heuristic of relative probability comparisons (HRPC), fit the experimental data in Barron and Erev (2003) surprisingly well: even in the choice situation where the HRPC predicts an exact indifference the actual distribution of subject responses was 49% to 51%.
Keywords: Heuristic of relative probability comparisons, feedback-based decisions
JEL Classification: C91, D11
Suggested Citation: Suggested Citation