TY - JOUR

T1 - An Experimental Analysis of the Prize-Probability Tradeoff in Stopping Problems

AU - Antler, Yair

AU - Arad, Ayala

PY - 2023

Y1 - 2023

N2 - We experimentally examine how individuals commit to a cutoff stopping rule when facing a sequence of independent lotteries. We identify two main behavior patterns: (1) a small share of participants consistently choose stopping rules whose gain bound (i.e., the accumulated gain at which the sequence stops) is larger than the loss bound, and (2) a larger share of participants consistently choose rules whose loss bound is larger than the gain bound. We introduce a procedural choice model that accounts for these patterns and show that the behavior of most of our participants is inconsistent with prominent theories of decision under risk.

AB - We experimentally examine how individuals commit to a cutoff stopping rule when facing a sequence of independent lotteries. We identify two main behavior patterns: (1) a small share of participants consistently choose stopping rules whose gain bound (i.e., the accumulated gain at which the sequence stops) is larger than the loss bound, and (2) a larger share of participants consistently choose rules whose loss bound is larger than the gain bound. We introduce a procedural choice model that accounts for these patterns and show that the behavior of most of our participants is inconsistent with prominent theories of decision under risk.

U2 - 10.1162/rest_a_01366

DO - 10.1162/rest_a_01366

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SN - 0034-6535

SP - 1

EP - 45

JO - Review of Economics and Statistics

JF - Review of Economics and Statistics

ER -