When a risky prospect is valued more than its best possible outcome

Andreas C. Drichoutis · Rodolfo M. Nayga · Jayson L. Lusk · Panagiotis Lazaridis

7 citations0/0 files storedJudgment and Decision Making

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Decision-Making and Behavioral Economics Economic and Environmental Valuation Experimental Behavioral Economics Studies

Abstract

Abstract In this paper, we document a violation of normative and descriptive models of decision making under risk. In contrast to uncertainty effects found by Gneezy, List and Wu (2006), some subjects in our experiments valued lotteries more than the best possible outcome. We show that the overbidding effect is more strongly related to individuals’ competitiveness traits than comprehension of the lottery’s payoff mechanism.

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2007z-Tree: Zurich toolbox for ready-made economic experiments 2002Risk Aversion and Incentive Effects 2006Economic Theory of Choice and the Preference Reversal Phenomenon 2005The Willingness to Pay–Willingness to Accept Gap, the “Endowment Effect,” Subject Misconceptions, and Experimental Procedures for Eliciting Valuations 2011The Willingness to Pay—Willingness to Accept Gap, the “Endowment Effect,” Subject Misconceptions, and Experimental Procedures for Eliciting Valuations: Comment 1998Effects of Trait Competitiveness and Perceived Intraorganizational Competition on Salesperson Goal Setting and Performance 1993Independent Private Value Auctions: Bidder Behaviour in First-, Second- and Third-Price Auctions with Varying Numbers of Bidders 2012Risk Preferences Are Not Time Preferences

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