Salience or event-splitting? An experimental investigation of correlation sensitivity in risk-taking

Moritz Loewenfeld () and Jiakun Zheng ()
Additional contact information
Moritz Loewenfeld: Toulouse School of Economics, University Toulouse Capitole
Jiakun Zheng: Aix Marseille Univ, CNRS, AMSE, Centrale Marseille

Journal of the Economic Science Association, 2024, vol. 10, issue 2, No 10, 346-366

Abstract: Abstract Salience theory relies on the assumption that not only the marginal distribution of lotteries, but also the correlation of payoffs across states impacts choices. Recent experimental studies on salience theory seem to provide evidence in favor of such correlation effects. However, these studies fail to control for event-splitting effects (ESE). In this paper, we seek to disentangle the role of correlation and event-splitting in two settings: (1) the common consequence Allais paradox as studied by Bordalo et al. (Q J Econ 127:1243–1285, 2012), Frydman and Mormann (The role of salience in choice under risk: An experimental investigation. Working Paper, 2018), and Bruhin et al. (J Risk Uncertain 65:139–184, 2022); (2) choices between Mao pairs as studied by Dertwinkel-Kalt and Köster (J Eur Econ Assoc 18:2057–2107, 2020). In both settings, we find evidence suggesting that recent findings supporting correlation effects are largely driven by ESE. Once controlling for ESE, we find no consistent evidence for correlation effects. Our results thus shed doubt on the validity of salience theory in describing risky behavior.

Keywords: Salience; Event-splitting; Probability weighting; Concordance; Experiment (search for similar items in EconPapers)
JEL-codes: C91 D81 D91 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s40881-024-00162-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jesaex:v:10:y:2024:i:2:d:10.1007_s40881-024-00162-w

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/40881

DOI: 10.1007/s40881-024-00162-w

Access Statistics for this article

Journal of the Economic Science Association is currently edited by Nikos Nikiforakis and Robert Slonim

More articles in Journal of the Economic Science Association from Springer, Economic Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().