Studies of Decision Making Under Risk and Uncertainty

This dissertation experimentally examines how the decision-making under risk of individuals’ is influenced by choice procedures, decision context, frames and exogenous information. The first study investigates a sequential procedure (to ease the choice overload problem) by presenting the products in sequential pages and requesting the decision-maker to select an item from each page, entering them into a wish list from which the final choice will be made. This study experimentally investigates how the final decision is affected by the number of items on each page and, hence, by the number of items in a wish list. The parameters of a stochastic model are estimated to ‘explain’ the data, in particular, examining the noisiness of the choices at each stage. The results show that procedure matters and that the trade-off between an increased number of options per page and an increased number of pages is indeed influential. The second study proposes an Asymmetric Risk Averse Quantal Response Equilibrium (QRE) extension of a cheap-talk model in lemon market. This extension better explains the observed deviations in Siegenthaler (2017)’s experiment from theoretical predictions. The third study experimentally investigates how the composition of choices and menus influences the decision-making in a two-stage context - one in which the decision-maker must first choose a menu from a set of menus, and secondly must choose an item from the chosen menu. Several choices of menu theories have been applied to identify how different types of decision-makers are influenced by different menu frames. The fourth study experimentally examine how social information, personal experience and professional suggestions interactively influence subjects’ decisions under risk. This study found an important factor: information congruence between information sources significantly affects the evolution of the decisions in a group.