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Reverse common ratio effect

Blavatskyy, P.R. (2010) Reverse common ratio effect. Journal of Risk and Uncertainty, 40 (3). pp. 219-241.

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The results of a new experimental study reveal highly systematic violations of expected utility theory. The pattern of these violations is exactly the opposite of the classical common ratio effect discovered by Allais (1953). Two recent decision theories-stochastic expected utility theory (Blavatskyy 2007) and perceived relative argument model (Loomes 2008)-predicted the existence of a reverse common ratio effect. However, these theories can rationalize only one part of the new experimental data reported in this paper. The other part appears to be neither predicted by existing theories nor documented in the existing empirical studies.

Item Type: Journal Article
Publisher: Springer
Copyright: © 2010 Springer Science+Business Media, LLC.
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