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 language | American English |
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Journal | Applied Economics Letters |
DOIs | |
State | Accepted/In press - 1 Jan 2024 |
Keywords
- experiment
- lottery
- Uncertainty effect
- utility
All Science Journal Classification (ASJC) codes
- Economics and Econometrics