Job Market Papers
Investigating the Empirical Validity of Salience Theory: The Role of Display Format Effects
Abstract: As predicted by the salience theory of choice under risk, the correlation between lotteries has been shown to affect subjects’ preferences. We conduct two online experiments challenging this perception. In our first experiment, we show that prominent recent experimental findings in support of salience-predicted correlation effects were driven by changes of the display format rather than the salience of payoffs: i) salience effects vanish when controlling for simultaneous changes in the display format when varying the correlation structure. ii) choice patterns previously attributed to the salience mechanism can be induced by keeping the correlation structure constant and only varying the display format. In our second experiment, we find that in a horse-race between display format and salience effects, the former are quantitatively more important. In a setup that allows studying correlation effects without confounding changes of the display format, we are unable to detect significant salience-predicted correlation effects.
An Experimental Investigation of the Allais Paradox with Subjective Probabilities and Correlated Outcomes, accepted for publication - Journal of Economic Psychology
Abstract: Decision theories like skew-symmetric additive models assume that individuals adhere to Savage’s sure-thing principle. The present paper investigates that prediction in an incentivized lab experiment using Allais-type choice problems with subjective probabilities. Real-world events are employed to implement an easy-to-understand correlation structure between outcomes. Additionally, we control for the role of display formats by presenting each choice problem once in a coalesced format and once in an event-splitting format that clearly reveals the state space and the underlying correlation structure to subjects. We find the Allais paradox to be present in both display formats, which contradicts the rationale of skew-symmetric additive models. Due to significant event-splitting effects, Allais-type preferences are more pronounced in the coalesced format. The obtained event-splitting effects suggest that subjects assign a higher value to a lottery when the event of disbursement of its upside payoff is split into subevents. That holds both for situations in which event-splitting helps unveiling the state space and also when this is not the case. Previous findings on correlated versions of the Allais paradox can at least partially be explained by event-splitting rather than correlation.
Didactic Publications
Transformationskurve, WISU, 50 Jg., Heft 3/21, p.313-324, 336. (with Friedrich L. Sell), 2021.
Die Klausur, WISU, 49. Jg., Heft 8-9/20, p.945-946. (with Friedrich L. Sell), 2020.
Die Klausur, WISU, 48. Jg., Heft 6/19, p.723-724. (with Friedrich L. Sell), 2019.
Makroökonomische Totalanalyse des Weltkapitalmarkts und der Eurozone, WISU, 47 Jg., Heft 8-9/18, p.968-976, 980. (with Friedrich L. Sell), 2018.