6 - evidence on dynamic choice Flashcards
(29 cards)
what is the paper
Cubitt Starmer and Sugden
what were the 3 challenges of the experimental design that needed to be solved
- plans
- incentives
- decision trees
what was the plans problem
how can you test dynamic consistency?
problem with observing plans in heads - hard to
- it is hard to directly test dynamic inconsistency
what was CSS solution to the planning challenge
looks at across problem restrictions instead of within (dynamic consistency is a within problem restrcition)
avoids the need to elicit a plan by using timining independence instead of dynamic consistency
what is the difference between timing independence and dynamic consistency
dynamic consistency = test if people plan ahead - final action at n2 (choice node) to be the same at n1 (planning node)
timing independence = the action you make at n2 would be the same regardless of the timing you had to make the decision - you would make that decision before or after the chance node
what was the incentives problem
within subjects design - no incentives
each person does all of the tasks
- problem with how you would incentivise all of the tasks = costly
- what if they already win enough money and then stop attempting the rest of the tasks
what was CSS solution to incentives problem
use a between subject design instead of within
- each subject one task for real money outcomes
- different groups of subjects face each task
* will compare the proportions of each group that make choices
- random assignment - no systematic differences between risk attitudes in each group
what was the Trees problem
theory assumes that frame independence justifies the use of decision trees for analysis on decision making
- but we cant assume that all subjects understand decision trees
- could make errors
what was CSS solution to trees problem
use words to describe the decision problems instead
- would test frame independence by using 2 problems that differ in verbal description but have the same tree
what are the 3 features of CSS that confront the challenges
- uses between-subjects design
- uses timing independence instead of dynamic consistency
- no trees - verbal descriptions of the problems
- tasks for real money
what was the structure of CSS experiment and what was it testing
scaled up problem
prior lottery problem
precommitment problem
2 stage problem
scaled down problem
what does EUT imply about scaled up and scaled down problem
equivalent
by 4 principles
- we should observe same behavuour in each stage
what does CRE suggest about scaled up and scaled down
some subjects will make different choices in each
- violate their equivalence
how did they test separability
- make choice
- make the choice after a lottery
- shouldnt matter what the history is they should make same chocie - same subtree
how did they test timing independence
- choice after lottery
- choose choice that will happen after the lottery - but make the choice before the lottery
- same choice just making it at a different time (ahead in time)
- it shouldnt matter at what time you make the choice
how did they test frame independence
only difference is the way the problem is verbally written
- has the same tree
how did they test reduction of compound lotteries
4.
5.
5 is just problem 4 but with the compound lotteries multiplied out
what did CSS find
results
- only found statistical difference in the proportion of subjects choosing risky option between
stage 2 and stage 3 - violation of timing independence
if EUT principles held what results would you expect to see
statistically similar proportions of subjects choosing risky option in each stage - if random allocation is valid
how was timing independence violated
subjects facing precommitment were twice as likely to choose risky option than those in the prior lottery
* evidence that people take more risks when they precommit
* people precommit to risks they wouldnt take if they werent precommitted
did CSS find results of CRE
- no statistical difference between 1 and 5 - doesnt show CRE
- pooled test - find that there is statistically significant difference between scaled up and scaled down - inconsistent with EUT
what was objective of CSS
to see if there is any violation of the principles
- found violation of timing independence
what does CRE do
- CRE not consistent with EUT
- CRE motivates behavioural models of risky choice
what is the case used to justify that EUT is the correct model of peoples underlying true preferences
- even with CRE
- people sometimes make random errors in their choice - explains why CRE - people switch
