Reconsidering the common ratio effect: the roles of compound independence, reduction, and coalescing
Theory and Decision 77 (3):323-339 (2014)
AbstractCommon ratio effects should be ruled out if subjects’ preferences satisfy compound independence, reduction of compound lotteries, and coalescing. In other words, at least one of these axioms should be violated in order to generate a common ratio effect. Relying on a simple experiment, we investigate which failure of these axioms is concomitant with the empirical observation of common ratio effects. We observe that compound independence and reduction of compound lotteries hold, whereas coalescing is systematically violated. This result provides support for theories which explain the common ratio effect by violations of coalescing instead of violations of compound independence.
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Violations of coalescing in parametric utility measurement.Andreas Glöckner, Baiba Renerte & Ulrich Schmidt - 2020 - Theory and Decision 89 (4):471-501.
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