Do individual violations of subjective expected utility persist in markets? Insights from an experiment

Anna Maffioletti · C.Dimauro Cdimauro

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Decision-Making and Behavioral Economics Experimental Behavioral Economics Studies Auction Theory and Applications

Abstract

Much of the evidence supporting the Ellsberg paradox comes from experiments on individual choice and judgement. In this study, we test whether, in market experiments, there is a tendency for anomalous behaviour to disappear or to be reduced as a consequence of market experience and feedback. The empirical validity of this assumption is assessed by running an auction market for the sale of both risky and uncertain prospects. We conclude that, with the repetition of the market experience, individual bids converge towards behaviour consistent with subjective expected utility.

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