Simplicity and Probability Weighting in Choice under Risk
- (pp. 421-25)
AbstractWe present a speculative application of model estimates from Fudenberg and Puri (2021) to prize-linked savings in South Africa. The models used include one combining simplicity theory (Puri 2018, 2022), a preference for lotteries with fewer possible outcomes, with cumulative prospect theory. The results and those of prior literature indicate that both simplicity and probability weighting have a role to play in understanding behavior in choice under risk. We discuss the properties of these models and their implications for behavior.
CitationFudenberg, Drew, and Indira Puri. 2022. "Simplicity and Probability Weighting in Choice under Risk." AEA Papers and Proceedings, 112: 421-25. DOI: 10.1257/pandp.20221091
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