Simplicity and Probability Weighting in Choice under Risk
Name
pandp.20221091.pdf
Description
Published version
Size
478.07 KB
Format
Adobe PDF
Checksum (MD5)
ab6a44102f58db27ab195c590126e4f9
Author(s)
Fudenberg, Drew
Puri, Indira
Date Issued
May 1, 2022
Journal
AEA Papers and Proceedings
Publisher
American Economic Association
Citation
Fudenberg, Drew and Puri, Indira. 2022. "Simplicity and Probability Weighting in Choice under Risk." AEA Papers and Proceedings, 112.
Version
Final published version
Abstract
We present a speculative application of model estimates from Fudenberg and Puri (2021) to prize-linked savings in South Africa. The models used include one combining simplicity theory (Puri 2018, 2022), a preference for lotteries with fewer possible outcomes, with cumulative prospect theory. The results and those of prior literature indicate that both simplicity and probability weighting have a role to play in understanding behavior in choice under risk. We discuss the properties of these models and their implications for behavior.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1257/pandp.20221091
