Framing and repetition effects on risky choices: A behavioral approach

Noemí Herranz-Zarzoso (nherranz@uji.es) and Gerardo Sabater-Grande (sabater@uji.es)
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Noemí Herranz-Zarzoso: LEE and Department of Economics, Universitat Jaume I, Castellón, Spain
Gerardo Sabater-Grande: LEE and Department of Economics, Universitat Jaume I, Castellón, Spain

No 2018/04, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: In this study we analyze framing effects caused by two versions of the choice (multiple price) list procedure used to elicitate individual risk preferences. In the probability equivalence (PE) version, subjects face pairwise choices between lotteries within a choice list. In the certainty equivalence (CE) version, subjects are asked to state a minimum selling price to give up the lottery they cope to. We implement a within-subjects experiment allowing for preference imprecision and preference for compound lotteries, by means of repetition of identical risk tasks. Introducing different variations in the number of lottery options offered with and without decreasing their range, we find that changes in the framework disturb subject’s risk preferences only in the CE version.

Keywords: risk aversion; framing effects; risk task repetition; preference imprecision; preference for compound lotteries; choice list procedure (search for similar items in EconPapers)
JEL-codes: C93 D03 D81 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2018
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
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