Abstract

http://ssrn.com/abstract=568902
 
 

Citations



 


 



Are Decisions under Risk Malleable?


Christina M. Fong


Carnegie Mellon University - Department of Social and Decision Sciences

Kevin A. McCabe


George Mason University - Department of Economics; George Mason University School of Law


Proceedings of the National Academy of Sciences, Vol. 96, No. 19, pp. 10927-10932, September 14, 1999

Abstract:     
Human decision making under risk and uncertainty may depend on individual involvement in the outcome-generating process. Expected utility theory is silent on this issue. Prospect theory in its current form offers little, if any, prediction of how or why involvement in a process should matter, although it may offer ex post interpretations of empirical findings. Well-known findings in psychology demonstrate that when subjects exercise more involvement or choice in lottery procedures, they value their lottery tickets more highly. This often is interpreted as an illusion of control, meaning that when subjects are more involved in a lottery, they may believe they are more likely to win, perhaps because they perceive that they have more control over the outcome. Our experimental design eliminates several possible alternative explanations for the results of previous studies in an experiment that varies the degree and type of involvement in lottery procedures. We find that in treatments with more involvement subjects on average place less rather than more value on their lottery tickets. One possible explanation for this is that involvement interacts with loss aversion by causing subjects to weigh losses more heavily than they would otherwise. One implication of our study is that involvement, either independently or in interaction with myopic loss aversion, may help explain the extreme risk aversion of bond investors.

Accepted Paper Series


Not Available For Download

Date posted: July 27, 2004  

Suggested Citation

Fong, Christina M. and McCabe, Kevin A., Are Decisions under Risk Malleable?. Proceedings of the National Academy of Sciences, Vol. 96, No. 19, pp. 10927-10932, September 14, 1999. Available at SSRN: http://ssrn.com/abstract=568902

Contact Information

Christina M. Fong (Contact Author)
Carnegie Mellon University - Department of Social and Decision Sciences ( email )
Pittsburgh, PA 15213-3890
United States
412-268-8168 (Phone)
Kevin A. McCabe
George Mason University - Department of Economics ( email )
4400 University Drive
Fairfax, VA 22030
United States
George Mason University School of Law ( email )
3301 Fairfax Drive
Arlington, VA 22201
United States
Feedback to SSRN


Paper statistics
Abstract Views: 490

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.265 seconds