Abstract
The uncertainty effect suggests that people may violate fundamental economic theories by pricing a binary lottery below its lowest outcome. This article examines the effect of anchoring on the uncertainty effect in a simple monetary binary lottery. We asked participants in an experiment about their willingness to pay in a simple lottery embedded with a numerical anchor. The results show that low (high) numerical anchoring exacerbates (ameliorates) the irrational behaviour causing the uncertainty effect.
| Original language | English |
|---|---|
| Journal | Applied Economics Letters |
| DOIs | |
| State | Accepted/In press - 2024 |
Keywords
- Uncertainty effect
- experiment
- lottery
- utility