Gregory DeAngelo, RPI Economics


Gregory DeAngelo, RPI Economics

Sage 4101

January 26, 2011 12:00 PM - 1:30 PM

Abstract:         Multi-reference point models of utility are becoming increasingly more popular (see Wang and Johnson (2011), Wang (2008)) mechanisms for examining choice behavior. Instead of using the status quo as a reference point à la Prospect Theory, the use of minimum survival levels and goals/aspirations as reference points have also become commonplace. In this work I examine how individuals respond to risky versus uncertain alternatives when trying to avoid elimination or obtain a goal in an experimental setting. Combining this evidence with past experimental work, I show that individuals pursue less risky options when attempting to cross a minimum survival reference point, but exhibit the opposite behavior – appearing to be less ambiguity averse – when attempting to cross the aspiration threshold. Interestingly, individuals that become uncertainty neutral/seeking in order to cross the aspiration threshold fall dangerously close to the minimum survival threshold.

Deterrence, Expected Cost, Uncertainty and Voting:  Experimental Evidence

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