Paper #934

Títol:

Risk aversion and embedding bias

Autors:

Antoni Bosch-Domènech i Joaquim Silvestre

Data:

Gener 2006

Resum:

In Selten (1967) �Strategy Method,� the second mover in the game submits a complete strategy. This basic idea has been exported to nonstrategic experiments, where a participant reports a complete list of contingent decisions, one for each situation or state in a given sequence, out of which one and only one state, randomly selected, will be implemented. In general, the method raises the following concern. If S0 and S1 are two different sequences of states, and state s is in both S0 and S1, would the participant make the same decision in state s when confronted with S0 as when confronted with S1? If not, the experimental results are suspect of suffering from an �embedding bias.� We check for embedding biases in elicitation methods of Charles Holt and Susan Laury (Laury and Holt, 2000, and Holt and Laury, 2002), and of the present authors (Bosch-Dom�nech and Silvestre, 1999, 2002, 2006a, b) by appropriately chosen replications of the original experiments. We find no evidence of embedding bias in our work. But in Holt and Laury�s method participants tend to switch earlier to the riskier option when later pairs of lotteries are eliminated from the sequence, suggesting the presence of some embedding bias.

Paraules clau:

Embedding bias, strategy method, Holt, Laury, Risk Attraction, Risk Aversion, Experiments, Leex

Codis JEL:

C91, D81

Àrea de Recerca:

Economia Experimental i del Comportament

Publicat a:

Theory and Decision, Volume 75:4, 465-496, 2013
Amb el títol:
"Measuring risk aversion with lists: A new bias"

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