Certainty preference, random choice, and loss aversion: a comment on "Violence and Risk Preference: Experimental Evidence from Afghanistan"

Vieider, F. M. (2018) Certainty preference, random choice, and loss aversion: a comment on "Violence and Risk Preference: Experimental Evidence from Afghanistan". American Economic Review, 108 (8). pp. 2366-2382. ISSN 0002-8282 doi: 10.1257/aer.20160789

Abstract/Summary

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.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/68354
Identification Number/DOI	10.1257/aer.20160789
Refereed	Yes
Divisions	Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
Uncontrolled Keywords	certainty effect, loss aversion, random choice, risk preferences
Publisher	American Economic Association
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