Abstract

The uncertainty effect suggests that people may violate fundamental economic theories by pricing a binary lottery below its lowest outcome. This article examines the effect of anchoring on the uncertainty effect in a simple monetary binary lottery. We asked participants in an experiment about their willingness to pay in a simple lottery embedded with a numerical anchor. The results show that low (high) numerical anchoring exacerbates (ameliorates) the irrational behaviour causing the uncertainty effect.

Original languageAmerican English
JournalApplied Economics Letters
DOIs
StateAccepted/In press - 1 Jan 2024

Keywords

  • experiment
  • lottery
  • Uncertainty effect
  • utility

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'The influence of anchoring on the uncertainty effect'. Together they form a unique fingerprint.

Cite this