English, Article, Journal or magazine article edition: Risk aversion and embedding bias Antoni Bosch-Domènech; Joaquim Silvestre

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Bookmark: http://trove.nla.gov.au/version/154870
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Risk aversion and embedding bias
Author
  • Antoni Bosch-Domènech
  • Joaquim Silvestre
Physical Description
  • preprint
Notes
  • In Selten (1967) “Strategy Method,” the second mover in the game submits a complete strategy. This basic idea has been exported to nonstrategic experiments, where a participant reports a complete list of contingent decisions, one for each situation or state in a given sequence, out of which one and only one state, randomly selected, will be implemented. In general, the method raises the following concern. If S0 and S1 are two different sequences of states, and state s is in both S0 and S1, would the participant make the same decision in state s when confronted with S0 as when confronted with S1? If not, the experimental results are suspect of suffering from an “embedding bias.” We check for embedding biases in elicitation methods of Charles Holt and Susan Laury (Laury and Holt, 2000, and Holt and Laury, 2002), and of the present authors (Bosch-Domènech and Silvestre, 1999, 2002, 2006a, b) by appropriately chosen replications of the original experiments. We find no evidence of embedding bias in our work. But in Holt and Laury’s method participants tend to switch earlier to the riskier option when later pairs of lotteries are eliminated from the sequence, suggesting the presence of some embedding bias.
  • Embedding bias, strategy method, Holt, Laury, Risk Attraction, Risk Aversion, Experiments, Leex
  • RePEc:upf:upfgen:934
Language
  • English
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