Simplicity and Probability Weighting in Choice under Risk

Drew Fudenberg and Indira Puri

AEA Papers and Proceedings, 2022, vol. 112, 421-25

Abstract: We present a speculative application of model estimates from Fudenberg and Puri (2021) to prize-linked savings in South Africa. The models used include one combining simplicity theory (Puri 2018, 2022), a preference for lotteries with fewer possible outcomes, with cumulative prospect theory. The results and those of prior literature indicate that both simplicity and probability weighting have a role to play in understanding behavior in choice under risk. We discuss the properties of these models and their implications for behavior.

JEL-codes: D44 D81 D91 O12 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/pandp.20221091

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