, Volume 46, Issue 1, pp 51-78

Probability Learning, Event-Splitting Effects and the Economic Theory of Choice

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Abstract

This paper reports an experiment which investigates a possible cognitive antecedent of event-splitting effects (ESEs) experimentally observed by Starmer and Sugden (1993) and Humphrey (1995) – the learning of absolute frequency of event category impacting on the learning of probability of event category – and reveals some evidence that it is responsible for observed ESEs. It is also suggested and empirically substantiated that stripped-down prospect theory will accurately predict ESEs in some decision making tasks, but will not perform well in others. This contention, it is argued, is indicative of fundamental descriptive shortcomings in the economic conception of choice under uncertainty and may entail implications beyond the direct concerns of this paper.