Certainty Preference, Random Choice, and Loss Aversion: A Comment on "Violence and Risk Preference: Experimental Evidence from Afghanistan"

Ferdinand Vieider ()

No em-dp2016-06, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: I revisit recent evidence uncovering a preference for certainty in violation of dominant normative and descriptive theories of decision making under risk. I explore two alternative explanations of the preference patterns found: i) systematic noise; and ii) reference dependence activated by salient outcomes. I develop choice lists that allow to disentangle these different explanations, and test them on rural subjects in southern India. The results reject explanations based on a preference for certainty in favor of explanations based on random choice. The estimates are further distorted by response mode effects, with loss aversion leading to an over-estimation of risk aversion.

Keywords: risk preferences; certainty effect; random choice; loss aversion (search for similar items in EconPapers)
JEL-codes: C91 D12 D81 O12 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2016-05-31
New Economics Papers: this item is included in nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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