Showing papers on "Certainty effect published in 2012"
TL;DR: In this article, the authors examined whether age differences in risk seeking are more likely to emerge when choices include a certain option (a sure gain or a sure loss) and found that older adults exhibited more risk seeking in the domain of losses than younger adults.
Abstract: A prevalent stereotype is that people become less risk taking and more cautious as they get older. However, in laboratory studies, findings are mixed and often reveal no age differences. In the current series of experiments, we examined whether age differences in risk seeking are more likely to emerge when choices include a certain option (a sure gain or a sure loss). In four experiments, we found that age differences in risk preferences only emerged when participants were offered a choice between a risky and a certain gamble but not when offered two risky gambles. In particular, Experiments 1 and 2 included only gambles about potential gains. Here, compared with younger adults, older adults preferred a certain gain over a chance to win a larger gain and thus, exhibited more risk aversion in the domain of gains. But in Experiments 3 and 4, when offered the chance to take a small sure loss rather than risking a larger loss, older adults exhibited more risk seeking in the domain of losses than younger adults. Both their greater preference for sure gains and greater avoidance of sure losses suggest that older adults weigh certainty more heavily than younger adults. Experiment 4 also indicates that older adults focus more on positive emotions than younger adults do when considering their options, and that this emotional shift can at least partially account for age differences in how much people are swayed by certainty in their choices.
179 citations
Posted Content•
TL;DR: In this paper, the authors report experimental findings about subjects' behavior in dynamic decision problems involving multistage lotteries with different timings of resolution of uncertainty, and study violations of the independence axiom in the light of the dynamic axioms' ones.
Abstract: We report experimental findings about subjects’ behavior in dynamic decision problems involving multistage lotteries with different timings of resolution of uncertainty. Our within subject design allows us to study violations of the independence axiom in the light of the dynamic axioms' ones : dynamic consistency, consequentialism and reduction of compound lotteries.
5 citations
Posted Content•
TL;DR: The authors traces temptations to biased beliefs, instead of the standard approach that traces temptation to biased tastes, and considers cases of temptations that are not traditionally considered as temptations, such as favoritism, the certainty effect, the spoiling of children, pornography-viewing, and regretting.
Abstract: This paper traces temptations to biased beliefs—instead of the standard approach that traces temptations to biased tastes. The proposed theory affords, in two ways, a more general framework than what is afforded by the standard approach: First, to start with biased beliefs can simultaneously explain the temptation to cheat others as well as the temptation to cheat oneself. Second, to start with biased beliefs allows us to go beyond the stress on biological urges and time-inconsistent tastes. This allows us to consider cases of temptations that are not traditionally considered as temptations–such cases include favoritism, the certainty effect, the spoiling of children, pornography-viewing, and regretting.
2 citations
Posted Content•
1 Jan 2012
TL;DR: In this article, a review of Cumulative Prospect Theory (CPT) as a framework for decision under risk is presented, which is an alternative theory of choice under risk and increasingly used to explain deviations from the traditional paradigm.
Abstract: Most economic models are prescriptive and based on expected utility theory. Decisions taken on the basis of these models ought to be completely rational and consistent with axioms of the expected utility theory. Prospect theory (PT) is an alternative theory of choice under risk and increasingly used to explain deviations from the traditional paradigm of rational agents. It is important to understand the concept of the PT and its cumulative representation, as well as how it is measured and whether and to what extent PT supports real decisions under risk. This article explores these questions and deliver some axiomatic research review of Cumulative Prospect Theory (CPT) as a framework for decision under risk.
1 citations
TL;DR: This article proposed stochastic Dominance (SD) to estimate decision weights with small probabilities, which is the raison d'etre of the employment of DW, and showed that DW is situation dependent: DW derived with one certain prospect are much different than those derived with two uncertain prospects.
Abstract: When one prospect is certain and the other uncertain, Cumulative Prospect Theory employs the certainty equivalent methodology to estimate Decision Weights (DW). However, DW may be different with two uncertain prospects. In this study, we neutralize the "certainty effect" and propose Stochastic Dominance (SD) to estimate DW for the first time with small probabilities, which is the raison d'etre of the employment of DW. Using SD we provide ranges, rather than point estimates, of DW parameters that are consistent with all possible S-shape value functions. Comparing CE and SD implied DW, we find that DW are situation dependent: DW derived with one certain prospect are much different than those derived with two uncertain prospects.
TL;DR: In this paper, the authors explore the functional form of the risk-certainty effect for deterrence and find evidence of a moderate deterrent effect, where perceived risk deters only when it reaches a certain threshold (between an estimated risk of.3 and.4).
Abstract: In this paper we explore the functional form of the risk-certainty effect for deterrence. Using a sample of serious youth offenders, we first estimate a simple linear model of the relationship between the perceived certainty of punishment and self-reported offending. Consistent with previous literature we find evidence of a moderate deterrent effect. We then examined whether, consistent with a linear model, the effect of perceived risk is truly constant at different ranges of the risk continuum. Estimating a nonparametric regression model that makes no a priori assumption about the functional form of the model but allows the data itself to yield the appropriate functional form, we found marked departures from linearity. Our examination showed evidence of both a tipping effect, whereby perceived risk deters only when it reaches a certain threshold (between an estimated risk of .3 and .4) and a substantially accelerated deterrent effect for individuals at the high end of the risk continuum. Perceived sancti...