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Why choice lists increase risk taking

Published online by Cambridge University Press:  14 March 2025

David J. Freeman  and
Guy Mayraz Open the ORCID record for Guy Mayraz [Opens in a new window]
David J. Freeman
Affiliation:
Department of Economics, Simon Fraser University, Burnaby, BC V5A 1S6, Canada
Guy Mayraz*
Affiliation:
Department of Economics, University of Melbourne, Parkville, VIC 3010, Australia
*
[email protected]
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Abstract

Choice lists with random incentives are widely used for preference elicitation. It is commonly assumed that subjects choose the same option in each question as they would have if it were the only question, but recent findings challenge this assumption. We conduct a large sample experiment varying incentives and presentation independently, and examine choices both near and away from certainty. We consistently find more risk taking when a choice between a safe prize and a risky lottery is embedded in a choice list than when it is presented on its own. This difference remains when we inform subjects of the paid choice in advance, implying that isolation fails not because of the random incentives scheme, but simply because the choice appears in a list together with others. We conjecture that subjects are uncertain about their preferences, reduce this uncertainty through considering the choices that confront them, and make cautious decisions in the interim. Other conditions and non-choice data support this interpretation. Our results open up the possibility that preferences inferred from choice lists offer a better indication of informed preferences than preferences inferred from single choices.

Keywords

Choice listsRandom incentive schemeDiscovered preferencesPresentation effect

JEL classification

C91: Laboratory, Individual Behavior D81: Criteria for Decision-Making under Risk and Uncertainty
Type
Original Paper
Information
Experimental Economics , Volume 22 , Issue 1 , 15 March 2019 , pp. 131 - 154
Copyright
Copyright © 2018 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10683-018-9586-z) contains supplementary material, which is available to authorized users.

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