Flipping a Coin: Theory and Evidence
Max Planck Institute for Tax Law and Public Finance
Social Science Research Center (WZB); Technische Universität Berlin (TU Berlin) - Faculty of Economics and Management; Institute for the Study of Labor (IZA)
Humboldt University Berlin; DIW Berlin
November 12, 2013
We investigate the possibility that a decision-maker prefers to avoid making a decision and instead delegates it to an external device, e.g., a coin flip. In a series of experiments the participants often choose lotteries between allocations, which contradicts most theories of choice such as expected utility but is consistent with a theory of responsibility aversion that implies a preference for randomness. A large data set on university applications in Germany shows a choice pattern that is also consistent with this theory and entails substantial allocative consequences.
Number of Pages in PDF File: 44
Keywords: preference for randomization, menu-dependent preference, individual decision making, university choice, matching
JEL Classification: D03, D01
Date posted: November 12, 2013
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