High Stakes Behavior with Low Payoffs: Inducing Preferences with Holt-Laury Gambles
Daniel Houser (),
Dorina Tila () and
Cathleen Johnson ()
Additional contact information
Cathleen Johnson: Department of Economics, The University of Arizona
Working Papers from Chapman University, Economic Science Institute
A continuing goal of experiments is to understand risky decisions when the decisions are important. Often a decision’s importance is related to the magnitude of the associated monetary stake. Khaneman and Tversky (1979) argue that risky decisions in high stakes environments can be informed using questionnaires with hypothetical choices (since subjects have no incentive to answer questions falsely.) However, results reported by Holt and Laury (2002, henceforth HL), as well as replications by Harrison (2005) suggest that decisions in “high” monetary payoff environments are not well-predicted by questionnaire responses. Thus, a potential implication of the HL results is that studying decisions in high stakes environments requires using high stakes. Here we describe and implement a procedure for studying high-stakes behavior in a low-stakes environment. We use the binary-lottery reward technique (introduced by Berg, et al (1986)) to induce preferences in a way that is consistent with the decisions reported by HL under a variety of stake sizes. The resulting decisions, all of which were made in a low-stakes environment, reflect surprisingly well the noisy choice behavior reported by HL’s subjects even in their highstakes environment. This finding is important because inducing preferences evidently requires substantially less cost than paying people to participate in extremely high-stakes games.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Journal Article: High stakes behavior with low payoffs: Inducing preferences with Holt–Laury gambles (2013)
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:chu:wpaper:08-11
Access Statistics for this paper
More papers in Working Papers from Chapman University, Economic Science Institute Contact information at EDIRC.
Bibliographic data for series maintained by Megan Luetje ().