Contingent Thinking and the Sure-Thing Principle: Revisiting Classic Anomalies in the Laboratory#

Ignacio Esponda and Emanuel Vespa

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: Abstract: We present an experimental framework to study the extent to which failures of contingent thinking explain classic anomalies in a broad class of environments, including overbidding in auctions and the Ellsberg paradox. We study environments in which the subject’s choices affect payoffs only in some states, but not in others. We find that anomalies are in large part driven by incongruences between choices in the standard presentation of each problem and a ‘contingent’ presentation, which focuses the subject on the set of states where her actions matter. Additional evidence suggests that this phenomenon is in large part driven by people’s failure to put themselves in states that have not yet happened even though they are made aware that their actions only matter in those states.

Keywords: Economics; Applied Economics; Applied economics; Econometrics; Economic theory (search for similar items in EconPapers)
Date: 2023-11-10
New Economics Papers: this item is included in nep-exp
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Citations: View citations in EconPapers (1)

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