The Relationship Between Risk Attitudes and Heuristics in Search Tasks : A Laboratory Experiment

Schunk, Daniel ; Winter, Joachim

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URN: urn:nbn:de:bsz:180-madoc-12665
Document Type: Working paper
Year of publication: 2005
The title of a journal, publication series: None
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Veröffentlichungen des MEA (Mannheim Research Institute For the Economics of Aging) > MEA Discussion Papers
Subject: 330 Economics
Subject headings (SWD): Heuristik , Risiko , Prospect-Theorie
Abstract: Existing evidence suggests that simple heuristics describe search behavior better than the optimal risk neutral stopping rule. Such behavior could be generated by two different classes of decision rules: (i) rules that are optimal conditional on utility functions departing from risk neutrality or (ii) heuristics derived from limited cognitive processing capacities and satisfycing. We test search models that depart from the standard assumption of risk neutrality to distinguish these two possibilities. In our experiment, we present subjects with a search task and with a specific lottery task to elicit their utility functions. Search heuristics are not related to measures of risk aversion, but to measures of loss aversion.
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