Evidence for multiple strategies in choice under risk

Giorgio Coricelli (), Enrico Diecidue () and Francesco D. Zaffuto ()
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Giorgio Coricelli: University of Southern California
Enrico Diecidue: INSEAD
Francesco D. Zaffuto: Sapienza University of Rome

Journal of Risk and Uncertainty, 2018, vol. 56, issue 2, No 4, 193-210

Abstract: Abstract This paper describes an experimental study that yields evidence for the coexistence of two decision strategies of choice under risk. Under the first strategy, choices are made based on aspiration levels – a heuristic that simplifies risky decisions. Under the second strategy, which can be used when aspiration levels are not determinative, choices are made based on preferences for positive skewness. Our model fitting confirms the efficacy of a two-pronged approach that can marshal either strategy depending on specific features of the risky prospects under consideration.

Keywords: Aspiration levels; Skewness preference; Cumulative prospect theory; Multiple strategies; Decision under risk; C52; C91; D81 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11166-018-9278-2

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