Abstract

http://ssrn.com/abstract=937254
 
 

References (42)



 
 

Citations (2)



 


 



Dynamic Choice, Independence and Emotions


Astrid Hopfensitz


Toulouse School of Economics (GREMAQ)

F. A. A. M. Van Winden


University of Amsterdam - Amsterdam School of Economics (ASE); CESifo (Center for Economic Studies and Ifo Institute); Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

September 2006

Tinbergen Institute Discussion Paper No. 06-087/1
CESifo Working Paper Series No. 1949

Abstract:     
From the viewpoint of the independence axiom of expected utility theory, an interesting empirical dynamic choice problem involves the presence of a global risk, that is, a chance of losing everything whichever safe or risky option is chosen. In this experimental study, participants have to allocate real money between a safe and a risky project. Treatment variable is the particular decision stage at which a global risk is resolved: (i) before the investment decision; (ii) after the investment decision but before the resolution of the investment risk; (iii) after the resolution of the investment risk. The baseline treatment is without global risk. Our goal is to investigate the isolation effect and the principle of timing independence under the different timing options of the global risk. In addition, we examine the role played by anticipated and experienced emotions in the choice problem. Main findings are a violation of the isolation effect, and support for the principle of timing independence. Although behavior across the different global risk cases shows similarities, we observe clear differences in people's affective responses. This may be responsible for the conflicting results observed in earlier experiments. Dependent on the timing of the global risk different combinations of anticipated and experienced emotions influence decision making.

Number of Pages in PDF File: 44

Keywords: emotions, investment, global-risk, background risk, laboratory experiment, regret, anxiety

JEL Classification: A12, C91, D81

working papers series


Download This Paper

Date posted: October 14, 2006  

Suggested Citation

Hopfensitz, Astrid and Van Winden, F. A. A. M., Dynamic Choice, Independence and Emotions (September 2006). Tinbergen Institute Discussion Paper No. 06-087/1; CESifo Working Paper Series No. 1949. Available at SSRN: http://ssrn.com/abstract=937254 or http://dx.doi.org/10.2139/ssrn.937254

Contact Information

Astrid Hopfensitz (Contact Author)
Toulouse School of Economics (GREMAQ) ( email )
Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France
F. A. A. M. Van Winden
University of Amsterdam - Amsterdam School of Economics (ASE) ( email )
Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )
Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands
Feedback to SSRN


Paper statistics
Abstract Views: 389
Downloads: 52
Download Rank: 218,142
References:  42
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.375 seconds