Negative recency, randomization device choice, and reduction of compound lotteries

Kim Kaivanto and Eike Kroll

No 22, Working Paper Series in Economics from Karlsruhe Institute of Technology (KIT), Department of Economics and Management

Abstract: We report an experiment in which subjects are not indifferent between real-money lotteries implemented with randomization devices that are equivalent under the Reduction Axiom. Instead choice behavior is consistent with subjective distortion of conditional probability, and this persists in treatment conditions that control for (i) computational limitations and (ii) possible confounding by ratio bias.

Keywords: reduction of compound lotteries; negative recency effect; gambler's fallacy; law of small numbers; randomization devices; instruments and materials; design of experiments; St. Petersburg paradox (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Negative recency, randomization device choice, and reduction of compound lotteries (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitwps:22

DOI: 10.5445/IR/1000022861

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