Decision making in the short and long run: repeated gambles and rationality.
Experimental evidence indicates that decision makers who reject a single play of a gamble may accept repeated plays of that gamble. The rationality of this pattern of preference has been investigated beginning with Samuelson's colleague (SC) who gained notoriety in a well-known paper. SC's pattern of preference is commonly viewed as a behavioural anomaly. Researchers from branches of psychology and economics have analysed the choice and, despite much debate, there remains considerable confusion. An axiomatic analysis of SC's choice has been used to motivate experimental studies in several disciplines. This paper identifies the axiomatic violation as that of an assumed rather than a normative condition. Therefore, contrary to popular belief, SC's choice is consistent with expected utility theory.
Aloysius
John A
JA
Information Systems Department, WCOB 204, Walton College of Business, University of Arkansas, Fayetteville, AR 72701, USA. aloysius@uark.edu
D002755:Choice Behavior; D003657:Decision Making; D004467:Economics; D005715:Gambling; D006801:Humans; D011336:Probability; D011340:Problem Solving; D012306:Risk; D035501:Uncertainty