The Uncertain Value of Uncertainty: When Consumers are Unwilling to Pay for What They Like
69 Pages Posted: 27 Oct 2015 Last revised: 16 Mar 2019
Date Written: March 14, 2019
Do people have an irrational dislike for risk? People pay less for uncertain prospects than their worst possible outcomes (Gneezy, List, and Wu 2006), and researchers have come to accept that this effect occurs because people dislike risk. We challenge this assumption across seven studies. Though people seem to irrationally dislike risky prospects when preference is assessed with pricing measures, such as willingness-to-pay, people display rational responses toward risky prospects when preference is assessed using rating measures, time measures (i.e., willingness-to-wait and anticipated time usage), and choice. We rule out alternative explanations and discuss crucial implications of our effects for both theory and application.
Keywords: Willingness-to-pay, Enjoyment, Uncertainty, Measurement, Preference
JEL Classification: M30, M31
Suggested Citation: Suggested Citation