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How do additional alternatives affect individual choice under uncertainty?

Authors


  • We thank Ed Hopkins, Jennifer Hunt, Cathleen Johnson, Stefan Klonner, Claude Montmarquette, an anonymous referee, and participants at the 2005 world meetings of the Economics Science Association Conference in Montreal and the 2005 NEUDC at Brown University, as well as seminar participants at McGill University, Ryerson University, the University of Guelph, and GRADE for their comments. We thank Gabriela Andrade for research assistance, as well as our field surveyors Johan Moran and Luis Suarez. We gratefully acknowledge the Social Science and Humanities Research Council of Canada for funding, and the Center for Interuniversity Research and Analysis on Organizations (CIRANO) and the Bell University Laboratory in Electronic Commerce and Experimental Economy for use of the experimental laboratory. Email: sonia.laszlo@mcgill.ca

Abstract

Abstract We show, in an artefactual field economics decision-making experiment, that the addition of an alternative to a choice set can affect the measurement of farmers' risk preferences in rural Peru. We found that an alternative that would normally be considered irrelevant was chosen in Peru, and that it affected choice between other alternatives. In Montreal, the irrelevant alternative was not chosen, but also affected choices between other alternatives. Comparing choices made in Peru with those made in Montreal, we identify beliefs and cultural characteristics that are likely to lead to these results.

Abstract

On montre, dans le cadre d'une étude de la prise de décision économique sur le terrain, que l'addition d'une possibilité additionnelle à un ensemble de possibles entre lesquels on peut choisir peut affecter la mesure de la préférence pour le risque des fermiers dans le secteur rural au Pérou. On découvre qu'une possibilité nouvelle qui serait normalement considérée comme hors cadre est choisie au Pérou, et que donc l'ajout a un impact sur le choix. A Montréal, la possibilité nouvelle hors cadre n'est pas choisie, mais l'ajout a un impact sur le choix entre les autres possibilités. En comparant les choix faits au Pérou et à Montréal, on identifie des croyances et caractéristiques culturelles susceptibles d'expliquer ces résultats.

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