Probability and Juxtaposition Effects: An Experimental Investigation of the Common Ratio Effect

Chris Starmer and Robert Sugden

Journal of Risk and Uncertainty, 1989, vol. 2, issue 2, 159-78

Abstract: Several theories explain the common ratio effect as probability effect resulting from properties of individuals' preference ordering over probability distributions of consequences. In contrast, regret theory explains it as the result of changes in the juxtaposition of consequences in the action/state matrix. This article reports an experiment that allowed probability effects and juxtaposition effects to be separately identified for some common ratio problems, some of which involved real gains and others, real losses. The main finding is that changes in the juxtaposition of consequences have systematic effects of choices in the direction predicted by regret theory. Copyright 1989 by Kluwer Academic Publishers

Date: 1989
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