Does Learning Diminish Violations of Independence, Coalescing and Monotonicity?
- 75 Downloads
Violations of expected utility theory are sometimes attributed to imprecise preferences interacting with a lack of learning opportunity in the experimental laboratory. This paper reports an experimental test of whether a learning opportunity which engenders accurate probability assessments, by enhancing understanding of the meaning of stated probability information, causes anomalous behaviour to diminish. The data show that whilst in some cases expected utility maximising behaviour increases with the learning opportunity, so too do systematic violations. Therefore, there should be no presumption that anomalous behaviour under risk is transient and that discovered preferences will be appropriately described by expected utility theory.
Keywordsdiscovered preferences event-splitting effects independence monotonicity probability learning
Unable to display preview. Download preview PDF.
- Bateman, I., Munro, A., Rhodes, B., Starmer, C., Sugden, R. 1997Does part-whole bias exist? An experimental investigationEconomic Journal107322331Google Scholar
- Becker, G., DeGroot, M., Marschak, J. 1964Measuring utility by a single-response sequential methodBehavioral Science9226232Google Scholar
- Camerer, C. (1995), Individual decision making, in Kagel, J. H. and Roth, A. E. (eds.), The Handbook of Experimental Economics, Princeton University Press, Princeton.Google Scholar
- Chu, Y., Chu, R. 1990The subsidence of preference reversals in simplified and marketlike experimental settings: A noteAmerican Economic Review80902911Google Scholar
- Cox, J.C., Grether, D.M. 1996The preference reversal phenomenon: Response mode, markets and incentivesEconomic Theory7381405Google Scholar
- Estes, W. K. (1976b), Some functions of memory in probability learning and choice behavior, in Bower, G. H. (ed.), The Psychology of Learning and Motivation, Vol. 10. Academic Press, New York.Google Scholar
- Friedman, D. 1998Monty Hall’s three doors: Construction and deconstruction of a choice anomalyAmerican Economic Review88933946Google Scholar
- Grether, D., Plott, C. 1979Economic theory of choice and the preference reversal rhenomenonAmerican Economic Review69623638Google Scholar
- Holt, C. 1986Preference reversals and the independence axiomAmerican Economic Review76508515Google Scholar
- Plott, C. R.: (1996), Rational individual behaviour in markets and social choice processes: The discovered preference hypothesis, in Arrow, K. J., Colombatto, E., Perlman, M., and Schmidt, C. (eds.), The Rational Foundations of Economic Behaviour, MacMillan, Basingstoke.Google Scholar
- Segal, U. 1988Does the preference reversal phenomenon necessarily contradict the independence axiom?American Economic Review78233236Google Scholar
- Slovic, P., Tversky, A. 1974Who accepts Savage’s axiom?Behavioral Science19368373Google Scholar
- Smith, V.L. 1989Theory, experiment and economicsJournal of Economic Perspectives3151169Google Scholar
- Tversky, A., Koehler, D.J. 1994Support theoryA nonextensional representation of subjective probability. Psychological Review101547567Google Scholar
- Tversky, A., Slovic, P., Kahneman, D. 1990The causes of preference reversalAmerican Economic Review80204217Google Scholar