Additional deliberation reduces pessimism: evidence from the double-response method

Katarzyna Gawryluk () and Michal Krawczyk ()
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Katarzyna Gawryluk: The Robert Zajonc Institute for Social Studies, University of Warsaw
Michal Krawczyk: University of Warsaw

Journal of the Economic Science Association, 2019, vol. 5, issue 1, No 5, 64 pages

Abstract: Abstract We conduct a laboratory experiment to investigate the impact of deliberation time on behavior under risk and uncertainty. Towards this end we ask our participant to make quick, intuitive evaluations of a number of lotteries and report resulting certainty equivalents. Yet, we invite them to modify these initial decisions, whenever they find, after (additional) deliberation, that they do not precisely represent their preference. Both certainty equivalents are incentivized (a double-response method). The choice of evaluated lotteries allows us to semi-parametrically estimate the value function and the probability weighting function within the paradigm of the cumulative prospect theory. The main finding is that deliberation raises the probability weighting function (reduces pessimism), especially in the case of lotteries involving unknown probabilities.

Keywords: Probability weighting; Prospect theory; Time pressure; Double-response method (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s40881-019-00070-4

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