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Risk and rationality: The effects of mood and decision rules on probability weighting


Fehr-Duda, Helga; Epper, Thomas; Bruhin, Adrian; Schubert, Renate (2011). Risk and rationality: The effects of mood and decision rules on probability weighting. Journal of Economic Behavior & Organization, 78(1-2):14-24.

Abstract

Empirical research has shown that people tend to overweight small probabilities and underweight large probabilities when valuing risky prospects, but little is known about factors influencing the shape of the probability weighting curve. Based on a laboratory experiment with monetary incentives, we demonstrate that pre-existing good mood is significantly associated with women’s probability weights: Women in a better than normal mood tend to weight probabilities relatively more optimistically. Many men, however, seem to be immunized against effects of incidental mood by applying a mechanical decision criterion such as maximization of expected value.

Abstract

Empirical research has shown that people tend to overweight small probabilities and underweight large probabilities when valuing risky prospects, but little is known about factors influencing the shape of the probability weighting curve. Based on a laboratory experiment with monetary incentives, we demonstrate that pre-existing good mood is significantly associated with women’s probability weights: Women in a better than normal mood tend to weight probabilities relatively more optimistically. Many men, however, seem to be immunized against effects of incidental mood by applying a mechanical decision criterion such as maximization of expected value.

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16 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:April 2011
Deposited On:15 Feb 2012 13:29
Last Modified:07 Dec 2017 12:42
Publisher:Elsevier
ISSN:0167-2681
Publisher DOI:https://doi.org/10.1016/j.jebo.2010.12.004
Other Identification Number:merlin-id:6791

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