Published December 10, 2020
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A Systematic Test of the Independence Axiom Near Certainty
- Creators
- Jain, Ritesh
- Nielsen, Kirby
Abstract
A large literature has documented violations of expected utility consistent with a preference for certainty (the "certainty effect"). We design a laboratory experiment to investigate the role of the certainty effect in explaining violations of the independence axiom. We use lotteries spanning over the entire probability simplex to detect violations systematically. We find that violations of independence consistent with the reverse certainty effect are much more common than violations consistent with the certainty effect. Results hold as we test robustness along two dimensions: varying the mixing lottery and moving slightly away from certainty.
Additional Information
We want to thank Yaron Azrieli, Doug Bernheim, Anujit Chakraborty, Paul J. Healy, Collin Raymond, John Rehbeck, Colin Sullivan, and the participants of the experimental reading group at the Ohio State University for providing helpful feedback on this project. All errors remain our own. Research support was provided by the Decision Science Collaborative of the Ohio State University. This study was approved by the Institutional Review Boards at Academia Sinica and Stanford University.Attached Files
Submitted - Independence.pdf
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Independence.pdf
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Additional details
- Eprint ID
- 107009
- Resolver ID
- CaltechAUTHORS:20201210-101529259
- Created
-
2020-12-10Created from EPrint's datestamp field
- Updated
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2020-12-10Created from EPrint's last_modified field
- Other Numbering System Name
- Institute of Economics, Academia Sinica (IEAS)
- Other Numbering System Identifier
- 20-A001