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RETESTING THE UNCERTAINTY EFFECT USING LOTTERIES WITH REAL PRODUCTS AND MONEY

Authors


Tal Shavit, Finance Department, The School of Business Administration, The College of Management Academic Studies, 7 Rabin Ave., Rishon-Le'Zion, Israel. Tel: +972-52-2920868; Fax: +972-3-9634117; Email: shavittal@gmail.com. The financial support of the Max Stern Academic College is gratefully acknowledged. We would like to thank Neta Cohen for her valuable assistance in collecting the data. An earlier version of this paper was presented at the Economic Science Association – ESA 2008 European Regional Meeting in Lyon, France. We thank the conference participants for their valuable comments.

ABSTRACT

In the current study, several experiments re-examine the uncertainty effect using lotteries that include real products, monetary outcomes and electronic gift cards in a between-subjects design. The study also takes the selling position into consideration, in addition to the buying position considered by all previous works on the uncertainty effect. The results indicate that for all types of lotteries, the bids are higher than the bids for the worst possible realization. These findings are consistent with the internality axiom and do not support the uncertainty effect.

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