Speaker: Theo Offerman (U Amsterdam)

«How Real is Hypothetical? A High Stakes Test of the Allais Paradox»,

joint work with Uri Gneezy, Brian Hall, Yoram Halevy and Jeroen van de Ven.

When: Thu, November 23, 1:15pm - 2:45pm

Where: Oskar-Morgenstern-Platz 1, 1090 Wien. Lecture room 9, 1st floor (map)

Abstract:

We investigate the effect of high incentives on behavior in the Allais paradox by varying the size of the incentive and whether payoffs are hypothetical or real. In the treatment with real high incentives, participants can earn up to 5 times the median monthly wage. We find two main results. First, in line with the Allais paradox, increasing real incentives leads to more violations of Expected Utility: The difference in the percentage of “safe” choices across the two lottery sets increases substantially with high incentives. Second, choices with high real incentives are better approximated by high hypothetical than by low real incentives.