Resolving Rabin’s paradox
Jason N. Doctor,
Daniella Meeker and
Additional contact information
Han Bleichrodt: Erasmus University Rotterdam
Jason N. Doctor: University of Southern California
Yu Gao: Peking University
Chen Li: Erasmus University Rotterdam
Daniella Meeker: University of South California
Journal of Risk and Uncertainty, 2019, vol. 59, issue 3, No 2, 239-260
Abstract We present a theoretical model of Rabin’s famous calibration paradox that resolves confusions in the literature and that makes it possible to identify the causes of the paradox. Using suitable experimental stimuli, we show that the paradox truly violates expected utility and that it is caused by reference dependence. Rabin already showed that utility curvature alone cannot explain his paradox. We, more strongly, do not find any contribution of utility curvature to the explanation of the paradox. We find no contribution of probability weighting either. We conclude that Rabin’s paradox underscores the importance of reference dependence.
Keywords: Rabin’s paradox; Reference dependence; Loss aversion; Prospect theory; D81; D03; C91 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s11166-019-09318-0 Abstract (text/html)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:jrisku:v:59:y:2019:i:3:d:10.1007_s11166-019-09318-0
Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11166/PS2
Access Statistics for this article
Journal of Risk and Uncertainty is currently edited by W. Kip Viscusi
More articles in Journal of Risk and Uncertainty from Springer
Bibliographic data for series maintained by Sonal Shukla ().