Empirical evidence of inconsistency in Standard Gamble choices under direct and indirect elicitation methods

Susan Chilton and Anne Spencer

Swiss Journal of Economics and Statistics (SJES), 2001, vol. 137, issue I, 65-86

Abstract: Expected Utility Theory (EUT) underlies the Standard Gamble (SG) method for eliciting people's preferences towards safety policy and risky treatments. Increasingly surveys using this method decompose the SG questions into two or more intermediate questions. Under the EUT assumption of procedural invariance these indirect responses are theoretically equivalent to those elicited directly through one question. We investigate the issue empirically in two studies, both of which find that procedure invariance is violated. Despite this, and the differences in the direction of the discrepancies that we observe in these studies, we show how these results are in fact consistent with an alternative theory to EUT - Prospect Theory - and discuss the implications for future policy and research.

Date: 2001
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