Distinguishing Common Ratio Preferences from Common Ratio Effects Using Paired Valuation Tasks

• 成果类型: Article
• 署名作者: McGranaghan, Christina; Nielsen, Kirby; O'Donoghue, Ted; Somerville, Jason; Sprenger, Charles d.
• 署名单位: University of Delaware; California Institute of Technology; Cornell University; Federal Reserve System - USA; Federal Reserve Bank - New York
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20221535
• 发表日期: 2024
• 页码: 307-347
• 关键词: PROSPECT-THEORY; expected utility; SIGN TEST; CHOICE; RISK; disappointment; VIOLATIONS; DECISION; BEHAVIOR; error

摘要

Without strong assumptions about how noise manifests in choices, we can infer little from existing empirical observations of the common ratio effect (CRE) about whether there exists an underlying common ratio preference (CRP). We propose to solve this inferential challenge using paired valuations, which yield valid inference under common assumptions. Using this approach in an online experiment with 900 participants, we find no evidence of a systematic CRP. To reconcile our findings with existing evidence, we present the same participants with paired choice tasks and demonstrate how noise can generate a CRE even for individuals without an associated CRP. (JEL C91, D81, D91)