Showing papers on "Certainty effect published in 2011"
TL;DR: In this paper, Halevy showed that one way of the equivalence is false and showed the correct and general relationships: diminishing impatience is equivalent to the certainty effect and that strong diminishing impatientience (i.e., hyperbolic discounting) is equivalent with the common ratio effect.
Abstract: Halevy (2008) states the equivalence between diminishing impatience (i.e., quasi-hyperbolic discounting) and the common ratio effect. The present paper shows that one way of the equivalence is false and shows the correct and general relationships: diminishing impatience is equivalent to the certainty effect and that strong diminishing impatience (i.e., hyperbolic discounting) is equivalent to the common ratio effect.
27 citations
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TL;DR: This paper studied the impact of self-esteem on risk-prone choices in an Allais-type decision context using hypothetical money and found that low selfesteem people will choose more frequently the safe option (rather than the risky-prone option) than high self- esteem people, whereas both low and high selfesteem individuals will show the same pattern of choices between two different risk-based options.
Abstract: Our experiment aims at studying the impact of self-esteem on risk-prone choices in an Allais-type decision context using hypothetical money. We use an Internet protocol in order to reach a large heterogeneous student population sample. An anticipated regret explanation for the certainty effect implies that self-esteem is a crucial psychological variable in what concerns risky decision, but only when the choice is between a safe option and a risky option. Thus, in our experiment, we hypothesize that low self-esteem people will choose more frequently the safe option (rather than the risky-prone option) than high self-esteem people, whereas low self-esteem and high self-esteem individuals will show the same pattern of choices between two different risk-based options. Our data confirm our hypothesis. Regarding risky choices preferences, we also observe that females, non economists and older people significantly exhibit safer choice preferences than other participants. We find also that men and students in economics are more likely to conform to expected utility theory than females and other social science students respectively. We then discuss what these findings mean for economic regret theory, and suggest that a complete theory of decision-making under risk should introduce both situational and motivational explanations of individual behaviour.
7 citations
TL;DR: In this paper, the uncertainty equivalent measure is used to compare expected utility and non-expectation utility theories, showing that expected utility performs well away from certainty, but fails near certainty for about 40% of subjects.
Abstract: There is convincing experimental evidence that Expected Utility fails, but when does it fail, how severely, and for what fraction of subjects? We explore these questions using a novel measure we call the uncertainty equivalent. We nd Expected Utility performs well away from certainty, but fails near certainty for about 40% of subjects. Comparing non-Expected Utility theories, we strongly reject Prospect Theory probability weighting, we support disappointment aversion if amended to allow violations of stochastic dominance, but nd the u-v model of a direct preference for certainty the most parsimonious approach.
1 Jan 2011
TL;DR: In this paper, the authors discuss the limitations of certainty, probability, and possibility of certainties, probability, and possibility in the case of certain types of insurance policies.
Abstract: 2 Critique 3 2.1 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Certainty, Probability, and Possibility . . . . . . . . . . . . . . . . . . . . . . 4 2.3 The Reflection Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.4 Probabilistic Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.5 The Isolation Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7