Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111256
Authors: 
Dertwinkel-Kalt, Markus
Köster, Mats
Year of Publication: 
2015
Series/Report no.: 
DICE Discussion Paper 189
Abstract: 
In contradiction to expected utility theory, various studies find that splitting events or attributes into subevents and subattributes can reverse a decision maker's choices. Most notably, these effects can induce first-order stochastic dominated choices. These violations of first-order stochastic dominance are framing effects, which expected utility theory, cumulative prospect theory and salience theory of choice under risk cannot account for. However, we propose a version of salience theory which unravels the underlying mechanism triggering such effects and which can explain the impact of event- and attribute-splitting on choices. Hereby, we provide further rationale for the broad validity of the salience mechanism and its strong descriptive power concerning human decision making.
Subjects: 
First-order stochastic dominance
Framing effects
Prospect theory
Salience theory
JEL: 
D8
ISBN: 
978-3-86304-188-5
Document Type: 
Working Paper

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