The impact of the certainty context on the process of choice.
In this study we examine how the introduction of a reference lottery with nonrandom outcomes alters the way in which choices among pairs of lotteries are made, even if it does not alter the choices. We use different domains (some of the lotteries produce gains, other losses) and different contexts (one member of the pair, the reference lottery, may be either risky or certain). In our experiment, the change from gain to loss domain affects choices: subjects are risk averse in the gain domain, but not in the loss domain. On the contrary, the context effect of the certain lottery does not affect choices. However, the introduction of the certainty reference lottery affects two behavioral variables, response time and brain activation, in a dramatic way. This result suggests that the certainty lottery promotes a different process through which preferences are revealed, even if the differences among lotteries may not be large enough to induce different choices.
Dickhaut
John
J
Department of Accounting, Carlson School of Management, University of Minnesota, Minneapolis, MN 55455, USA.
McCabe
Kevin
K
Nagode
Jennifer C
JC
Rustichini
Aldo
A
Smith
Kip
K
Pardo
José V
JV