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Risk, complexity, and deviations from expected-value maximization: results of a lottery choice experiment

By Steffen Huck and Georg Weizsacker

Abstract

Varying several parameters of single-stage lottery choice tasks we investigate the question which features of a decision task lead subjects to deviate from maximizing expected monetary value (EV). Despite small differences in EV between the two lotteries in the choice sets, the subjects on average chose the lottery with the higher EV in every task. Risk avoidance occurs, but not consistently over all tasks. Further results are that subjects prefer less complex lotteries over more complex ones, and that risk matters the more the less complex the decision task is

Topics: HB Economic Theory
Publisher: Elsevier
Year: 1999
DOI identifier: 10.1016/S0167-4870(99)00031-8
OAI identifier: oai:eprints.lse.ac.uk:4944
Provided by: LSE Research Online
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