Abstract
New technology can be used to enhance safety by imposing costs, or taxes, on certain reckless behaviors. The current paper presents two pre-registered experiments that clarify the impact of taxation of this type on decisions from experience between three alternatives. Experiment 1 focuses on an environment in which safe choices maximize expected returns and examines the impact of taxing the more attractive of two risky options. The results reveal a U-shaped effect of taxation: some taxation improves safety, but too much taxation impairs safety. Experiment 2 shows a clear negative effect of high taxation even when the taxation eliminates the expected benefit from risk-taking. Comparison of alternative models suggests that taxing reckless behaviors backfires when it significantly increases the proportion of experiences in which a more dangerous behavior leads to better outcomes than the taxed behavior. Qualitative hypotheses derived from naïve sampling models assuming small samples were only partially supported by the data.
Original language | English |
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Pages (from-to) | 266-281 |
Number of pages | 16 |
Journal | Judgment and Decision Making |
Volume | 15 |
Issue number | 2 |
State | Published - Mar 2020 |
Keywords
- Negative effect of taxation
- Reliance on small samples
- Reversed payoff variability effect
- Safety-enhancement
All Science Journal Classification (ASJC) codes
- General Decision Sciences
- Economics and Econometrics
- Applied Psychology