Preference for randomization: Empirical and experimental evidence

Nadja Dwenger, Dorothea Kübler and Georg Weizsäcker

No 2013-004, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: We investigate violations of consequentialism in the form of the stochastic dominance property. The property is shared by many theories of choice and implies that the decision-maker prefers receiving the best outcome for sure over all lotteries that involve multiple outcomes. We run experiments to demonstrate that dominated randomization can be attractive. In treatments where decision-makers are asked to submit multiple decisions without knowing which one is relevant, many participants submit contradictory sets of decisions and thereby induce a dominated lottery between outcomes. Explicit choice of non-consequentialist randomization is observed in a separate treatment. A possible reason for the e ect is the desire to avoid having to make the decision. A large data set on (high-stake) university applications in Germany shows patterns that are consistent with a preference for randomization.

Keywords: stochastic dominance violations; individual decision making; university choice; matching (search for similar items in EconPapers)
JEL-codes: D01 D03 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2013-004

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