Simplicity and Probability Weighting in Choice under Risk

Author(s)
Fudenberg, Drew; Puri, Indira
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Abstract
<jats:p> 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. </jats:p>
Date issued
2022-05-01
URI
https://hdl.handle.net/1721.1/144474
Department
Massachusetts Institute of Technology. Department of Economics
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
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