How Certain Is the Uncertainty Effect?

Ondrej Rydval, Andreas Ortmann, Sasha Prokosheva and Ralph Hertwig

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: We replicate three pricing tasks of Gneezy, List and Wu (2006) for which they document the so-called uncertainty effect, namely, that people value a binary lottery over non-monetary outcomes less than other people value the lottery’s worse outcome. While the authors implemented a verbal lottery description, we use a physical lottery format which makes misinterpretation of the lottery structure highly unlikely. We also provide subjects with complete information about the goods they are to value (book gift certificates and one-year deferred payments). Contrary to Gneezy et al. (2006), we observe for all three pricing tasks that subjects’ willingness to pay for the lottery is significantly higher than other subjects’ willingness to pay for the lottery’s worse outcome.

Keywords: Decision under risk; framing; experiments; task ambiguity. (search for similar items in EconPapers)
JEL-codes: C81 C91 C93 D83 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Journal Article: How certain is the uncertainty effect? (2009)
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