Testing for salience effects in choices under risk
Research output: Contribution to journal › Journal article › Research › peer-review
Standard
Testing for salience effects in choices under risk. / Nielsen, Carsten Søren; Sebald, Alexander Christopher; Sørensen, Peter Norman.
In: Review of Economics and Statistics, 2024.Research output: Contribution to journal › Journal article › Research › peer-review
Harvard
APA
Vancouver
Author
Bibtex
}
RIS
TY - JOUR
T1 - Testing for salience effects in choices under risk
AU - Nielsen, Carsten Søren
AU - Sebald, Alexander Christopher
AU - Sørensen, Peter Norman
PY - 2024
Y1 - 2024
N2 - We construct and run an experiment to test the most basic choice effect pre-dicted by Salience Theory. Subjects allocate wealth between a risky and a safeinvestment. While we vary an apparent payoff ratio to influence salience, treat-ments have economically equivalent consequences. Most other theories of behaviorthen predict zero effect. Our experimental findings are strongly consistent withthe behavioral implication of a continuous version of Salience Theory. We providea novel structural estimate on the strength of salience. In our setting, increasingthe relative payoff contrast by one percent is equivalent to an increased odds ratioby about 0.4 percent.
AB - We construct and run an experiment to test the most basic choice effect pre-dicted by Salience Theory. Subjects allocate wealth between a risky and a safeinvestment. While we vary an apparent payoff ratio to influence salience, treat-ments have economically equivalent consequences. Most other theories of behaviorthen predict zero effect. Our experimental findings are strongly consistent withthe behavioral implication of a continuous version of Salience Theory. We providea novel structural estimate on the strength of salience. In our setting, increasingthe relative payoff contrast by one percent is equivalent to an increased odds ratioby about 0.4 percent.
U2 - 10.1162/rest_a_01307
DO - 10.1162/rest_a_01307
M3 - Journal article
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
SN - 0034-6535
ER -
ID: 382550408