We use data from an Internet-based survey and estimate the benefits of an oyster consumption safe... more We use data from an Internet-based survey and estimate the benefits of an oyster consumption safety policy with the contingent valuation method. In addition to providing a context-specific estimate of willingness-to-pay for oyster safety, we consider an important issue in the contingent valuation mortality risk reduction literature. A number of studies find that willingness-to-pay for mortality risk reduction is not sensitive to the scope of the risk change. We present the scope test as a difference in the number of lives saved by the program, instead of small changes in risk, and find that referendum votes are responsive to scope. A third feature of this article is that we identify those at-risk respondents who would most benefit from the policy and decompose willingness-to-pay into use values and altruistic nonuse values. We find that willingness-to-pay per life saved ranges from $3.95 million to $7.69 million for the private good of lives saved when the respondent is at risk (i.e., use values). Willingness-to-pay per life saved including both use and altruistic nonuse values ranges from $6.89 million to $12.87 million.
Recent research examining voting behavior in contingent valuation referenda informs on how conseq... more Recent research examining voting behavior in contingent valuation referenda informs on how consequential survey respondents behave and its impact on willingness-to-pay (WTP) values. This research attempts to examine whether this behavior holds across population subgroups. We consider resident and nonresident users of artificial reefs and find improved construct validity for our resident models over nonresident models. Specifically, resident behavior is in line with a priori expectations with consequential residents more likely to vote in favor of a policy for additional reef funding – a result that is consistent with the “protest no” literature. Consequently, consequential resident voters exhibit a greater WTP than inconsequential voters. Nonresident behavior differs, however. For this subgroup, consequentiality does not influence voting behavior and WTP values do not differ by consequentiality. Overall, more work is required to appropriately identify WTP values for nonresident popu...
Consumers’ willingness to pay for postharvest-processed (PHP) raw oysters—oysters without health ... more Consumers’ willingness to pay for postharvest-processed (PHP) raw oysters—oysters without health risks—is studied in experimental auction markets. The experimental design decomposes the effects of taste, objective risk information, and information on four PHP technologies on consumer valuations. Results show that relatively uninformed consumers are willing to pay equivalent amounts for PHP and traditional raw oysters. However, after a blind taste test, consumers are willing to pay a significant premium for traditional raw oysters, and the premium persists after objective information on risk and processing technologies is provided. The results are robust across PHP technologies.
Journal of Environmental Economics and Policy, 2015
Traditional revealed and stated preference (RP/SP) models consider a typical individual's behavio... more Traditional revealed and stated preference (RP/SP) models consider a typical individual's behavioral responses to various policy-based information treatments. For some costbenefit applications in which resource managers are concerned with responses from a representative individual, this is sufficient. However, as behavioral responses to information treatments can vary across respondents, we develop a latent class analysis to examine unobserved homogenous subgroup responses to health-risk information treatments. Results from a probabilistic model indicate that homogenous classes of consumers respond differently to the health-risk information treatments. This suggests that future policy-based research could benefit from examining potential heterogeneity in individuals' responses to risk information treatments in order to fully understand the efficacy of treatments on behavior. JEL Q18, Q22, Q51 2 A "case state" refers to a state in which an individual has died from consuming a raw, Gulf of Mexico oyster.
Journal of Accounting, Auditing & Finance, 1992
Stock price response to analyst recommendations in the Wall Street Journal “Heard on the Street” ... more Stock price response to analyst recommendations in the Wall Street Journal “Heard on the Street” column are examined for their usefulness in short-term trade decision making. The stock price response relation to firm size is also examined. Information from the column appears to produce statistically significant but economically insignificant stock price movements. Firm size is important only for negative comments in the column.
Journal of Agricultural and Applied Economics, 2009
A web-based contingent behavior analysis was developed to quantify the effect of both negative an... more A web-based contingent behavior analysis was developed to quantify the effect of both negative and positive information treatments and post harvest processes on demand for oysters. Results from a panel model indicate that consumers of raw and cooked oysters behave differently after news of an oyster-related human mortality. While cooked oyster consumers take precautionary measures against risk, raw oyster consumers exhibit optimistic bias and increase their consumption level. Further, by varying the source of a counter-information treatment, we find that source credibility impacts behavior. Oyster consumers, and in particular, raw oyster consumers, are most responsive to information provided by a not-for-profit, nongovernmental organization. Finally, post harvest processing of oysters has no impact on demand.
A natural experiment setting is exploited to develop a unique dataset of oyster consumer actual a... more A natural experiment setting is exploited to develop a unique dataset of oyster consumer actual and anticipated behavior immediately prior to and following the BP Deepwater Horizon oil spill. Using data from a repeat sample of oyster consumers, a pre and post-spill revealed and stated preference model allows both a short and longer-term response to the spill to be investigated. Findings indicate that, as expected, the BP spill had a negative impact on oyster demand in terms of short-run actual behavior, although spill effects show signs of dissipating several months following the spill. However, by accounting for unobserved heterogeneity in the sample, findings further indicate that short and longer-term spill responses differ across consumer groups. For the larger consumer groups, the negative spill effects continue over the longer-term horizon, while other groups are either non-responsive or increase consumption following news of the spill.
Economic interdependence between nations has been the focus of considerable research. A particula... more Economic interdependence between nations has been the focus of considerable research. A particular avenue of international interrelationship that has received a great deal of recent attention is the integration of international stock markets. Increased trade between nations implies that domestic corporate profitability will be influenced by economic conditions in other countries. If international influence is widespread between particular markets then it is likely that measures of overall market performance will be related.
Page 1. THE JOURNAL OF INDUSTRIAL ECONOMICS 0022-1821 $2.00 Volume XXXVII June 1989 No. 4 THE IMP... more Page 1. THE JOURNAL OF INDUSTRIAL ECONOMICS 0022-1821 $2.00 Volume XXXVII June 1989 No. 4 THE IMPACT OF ANTITRUST LITIGATION ON SHAREHOLDER RETURN* WILLLAM L. HuTH and DON N. MACDONALD ...
In a single-site travel cost model framework, revealed and stated preference data are jointly est... more In a single-site travel cost model framework, revealed and stated preference data are jointly estimated to provide the first use-value estimate associated with recreational cave diving. Focusing on one of Florida's first magnitude springs, we estimate average perperson per-trip use values of approximately $155, generating annual cave diving use values in the region of $1075. Further, in an investigation of potential site quality changes, we find that divers are sensitive to scope effects with an additional cave system increasing annual per-person use values by approximately $100, while improved access yields an additional $50 in per-person annual consumer surplus. Finally, three additional model specifications are estimated and indicate that divers use different travel cost preferences when assessing their revealed and stated preference trip counts but a single preference structure to evaluate site quality changes.
Using data drawn from a web-based travel cost survey, we jointly model revealed and stated prefer... more Using data drawn from a web-based travel cost survey, we jointly model revealed and stated preference trip count data in an attempt to estimate the recreational use value from diving the intentionally sunk USS Oriskany. Respondents were asked to report their: (i) actual trips from the previous year, (ii) anticipated trips in the next year, and (iii) anticipated trips next year assuming a second diveable vessel (a Spruance class destroyer) is sunk in the same vicinity. Results from several different model specifications indicate average per-person, per-trip use values range from
Fresh water springs are unique natural resources that are contained within public lands across th... more Fresh water springs are unique natural resources that are contained within public lands across the United States. Natural resource management on public lands generates many interesting policy issues as the competing goals of conservation, recreational opportunity provision, and revenue generation often clash. As demand for recreational cave diving sites increases, this article provides natural resource site managers with the first statistical estimate of divers' willingness to pay (WTP) to dive cave and cavern systems. Using a contingent valuation model (CVM) and correcting for hypothetical bias, we find that divers' median WTP for cave diving opportunities at the site of interest is between $52 and $83 per dive. Model results also provide weak evidence of diver sensitivity with respect to scope, as individuals are willing to pay more for dives that are judged to be higher in quality.
The liquidity component from financial analysis has been found to be an important predictor of a ... more The liquidity component from financial analysis has been found to be an important predictor of a firm's financial well being. Altman's credit worthiness and financial viability system uses, among six other financial measures, the current ratio as a liquidity discriminant variable. The Altman system itself has had considerable success in the prediction of corporate bankruptcy. Altman reported that the system correctly predicted bankruptcy 93% of the time using financial statements one period prior to failure and 87% with financial statements two periods prior. The Value Line Investment Survey also contains a measure of financial strength that incorporates a liquidity measure.
The standard capital market event study is used to measure Japanese firm-specific effects resulti... more The standard capital market event study is used to measure Japanese firm-specific effects resulting from action taken by the US in response to alleged dumping of Japanese imports in US markets. Empirical findings are that winners and losers in the process differ predictably from each other and from the market in the way that Japanese investors view them, with differences
Abstract This article reports experiments dealing with individual subject valuation and preferenc... more Abstract This article reports experiments dealing with individual subject valuation and preference over prospect pairs that are known to generate systematic intransitivities in choice behavior termed “preference reversals”. The authors examine whether alternative procedures to those previously employed for eliciting individual limit selling prices over prospects alters the incidence or dollar magnitude of preference reversals. It is found that when individual limit selling prices over prospects are elicited in a repetitive, second-price sealed Vickrey (1961) auction market framework, rather than under the traditional single response Becker, DeGroot, and Marshak (1964) procedure, that the dollar magnitude of preference reversals declines significantly. Initially, when opening Vickrey auction limit selling prices are combined with individual subject choices over prospects, previous results like those of Grether and Plott (1979) are obtained. When ending Vickrey auction limit selling prices are combined with individual subject choices over prospects, the dollar magnitude of reversals declines significantly. These results imply that markets can be efficient and yield market clearing prices under a given arrangement of property rights even if the behavior of some individuals is inconsistent with expected utility theory.
Page 1. SHORTER ARTICLES Flood Hazard Pricing and Insurance Premium Differentials: Evidence From ... more Page 1. SHORTER ARTICLES Flood Hazard Pricing and Insurance Premium Differentials: Evidence From the Housing Market Don N. MacDonald, Harry L. White, Paul M. Taube and William L. Huth* Abstract In this article, a ...
The Bureau of Economic Analysis (BEA) regularly publishes data on the current state and anticipat... more The Bureau of Economic Analysis (BEA) regularly publishes data on the current state and anticipated future of the domestic economy. This information is frequently used, mainly in a qualitative sense, by policymakers and other economic agents to assess the direction of economic activity. This paper examines the quantitative time interrelationships between the composite economic indicators. Specifically, crosscorrelations were computed from the white noise innovations from univariate AR-IMA models and used to isolate the delay behavior and directional relation between the series pairs. The correlations were also used to specify a multivariate time series model connecting the coincident and leading indexes of economic activity. *A debt of gratitude is owed to the anonymous referees for their comments and suggestions and to Northeastern University, Boston, where a major portion of the research took place.
The effect of union decertification elections on the valuation of corporations is examined using ... more The effect of union decertification elections on the valuation of corporations is examined using a standard event study methodology. Cumulative abnormal daily common stock returns for 203 NYSE and AMEX listed firms are estimated for the day on which apetition for a decertification election is filed and for the day on which the National Labor Relations Board (NLRB) certifies the decertification election outcome. The results are consistent with the hypothesis that successful union decertifications increase firm valuation and unsuccessful ones reduce firm valuation. The primary carrier of valuation information is the date the NLRB confirms the decertification election results. The petition file date yields little, if any, information about the firm "s capitalization.
Abstract A theoretical framework is presented for analyzing psychological, perceptual, or expecta... more Abstract A theoretical framework is presented for analyzing psychological, perceptual, or expectational effects on household expenditure within a complete demand system that is also consistent with household utility-maximizing behavior. The model was estimated with the Consumer Sentiment Index (CSI), which represents an index of consumer perceptions of future economic conditions, and was re-estimated for several CSI components separately. From the CSI, evidence was found for significant expectational effects for 4 of the 11 expenditure categories: alcohol, housing services, durable goods, and other services. The results demonstrate the model's potential usefulness for both demand forecasting and policy analysis.
In this paper a series of experiments are reported using human subjects choosing over distributio... more In this paper a series of experiments are reported using human subjects choosing over distributions of negative expected value. The experiments were designed to examine preference reversals and fanning out type violations of expected utility theory. Each subject was endowed with an initial wealth position and asked to choose between lotteries in which they were forced, if they lost, to forfeit a portion of their fixed endowment. Consistent and systematic violations of expected utility theory were found within the loss domain which were a mirror reflection of those found within the gain domain. Preference reversals were also present over losses, but the reversal rate was lower than the rate for prospects with positive expected value. No relationship between fanning out type violations of expected utility theory and preference reversals was found, in contrast to recent theoretical predictions. *The advice of Ray Battalio, John Kagel and Jerry L. Wall, and the valuable research assistance of Becky Allen and Lesa Lawrence are gratefully acknowledged. The financial support of Northeast Louisiana University and the University of North Texas was essential to the research reported here. Any remaining errors or omissions are the sole responsibility of the authors. 'See Machina (1983b, 1987) for a review of experimental evidence on the independence axiom.
We use data from an Internet-based survey and estimate the benefits of an oyster consumption safe... more We use data from an Internet-based survey and estimate the benefits of an oyster consumption safety policy with the contingent valuation method. In addition to providing a context-specific estimate of willingness-to-pay for oyster safety, we consider an important issue in the contingent valuation mortality risk reduction literature. A number of studies find that willingness-to-pay for mortality risk reduction is not sensitive to the scope of the risk change. We present the scope test as a difference in the number of lives saved by the program, instead of small changes in risk, and find that referendum votes are responsive to scope. A third feature of this article is that we identify those at-risk respondents who would most benefit from the policy and decompose willingness-to-pay into use values and altruistic nonuse values. We find that willingness-to-pay per life saved ranges from $3.95 million to $7.69 million for the private good of lives saved when the respondent is at risk (i.e., use values). Willingness-to-pay per life saved including both use and altruistic nonuse values ranges from $6.89 million to $12.87 million.
Recent research examining voting behavior in contingent valuation referenda informs on how conseq... more Recent research examining voting behavior in contingent valuation referenda informs on how consequential survey respondents behave and its impact on willingness-to-pay (WTP) values. This research attempts to examine whether this behavior holds across population subgroups. We consider resident and nonresident users of artificial reefs and find improved construct validity for our resident models over nonresident models. Specifically, resident behavior is in line with a priori expectations with consequential residents more likely to vote in favor of a policy for additional reef funding – a result that is consistent with the “protest no” literature. Consequently, consequential resident voters exhibit a greater WTP than inconsequential voters. Nonresident behavior differs, however. For this subgroup, consequentiality does not influence voting behavior and WTP values do not differ by consequentiality. Overall, more work is required to appropriately identify WTP values for nonresident popu...
Consumers’ willingness to pay for postharvest-processed (PHP) raw oysters—oysters without health ... more Consumers’ willingness to pay for postharvest-processed (PHP) raw oysters—oysters without health risks—is studied in experimental auction markets. The experimental design decomposes the effects of taste, objective risk information, and information on four PHP technologies on consumer valuations. Results show that relatively uninformed consumers are willing to pay equivalent amounts for PHP and traditional raw oysters. However, after a blind taste test, consumers are willing to pay a significant premium for traditional raw oysters, and the premium persists after objective information on risk and processing technologies is provided. The results are robust across PHP technologies.
Journal of Environmental Economics and Policy, 2015
Traditional revealed and stated preference (RP/SP) models consider a typical individual's behavio... more Traditional revealed and stated preference (RP/SP) models consider a typical individual's behavioral responses to various policy-based information treatments. For some costbenefit applications in which resource managers are concerned with responses from a representative individual, this is sufficient. However, as behavioral responses to information treatments can vary across respondents, we develop a latent class analysis to examine unobserved homogenous subgroup responses to health-risk information treatments. Results from a probabilistic model indicate that homogenous classes of consumers respond differently to the health-risk information treatments. This suggests that future policy-based research could benefit from examining potential heterogeneity in individuals' responses to risk information treatments in order to fully understand the efficacy of treatments on behavior. JEL Q18, Q22, Q51 2 A "case state" refers to a state in which an individual has died from consuming a raw, Gulf of Mexico oyster.
Journal of Accounting, Auditing & Finance, 1992
Stock price response to analyst recommendations in the Wall Street Journal “Heard on the Street” ... more Stock price response to analyst recommendations in the Wall Street Journal “Heard on the Street” column are examined for their usefulness in short-term trade decision making. The stock price response relation to firm size is also examined. Information from the column appears to produce statistically significant but economically insignificant stock price movements. Firm size is important only for negative comments in the column.
Journal of Agricultural and Applied Economics, 2009
A web-based contingent behavior analysis was developed to quantify the effect of both negative an... more A web-based contingent behavior analysis was developed to quantify the effect of both negative and positive information treatments and post harvest processes on demand for oysters. Results from a panel model indicate that consumers of raw and cooked oysters behave differently after news of an oyster-related human mortality. While cooked oyster consumers take precautionary measures against risk, raw oyster consumers exhibit optimistic bias and increase their consumption level. Further, by varying the source of a counter-information treatment, we find that source credibility impacts behavior. Oyster consumers, and in particular, raw oyster consumers, are most responsive to information provided by a not-for-profit, nongovernmental organization. Finally, post harvest processing of oysters has no impact on demand.
A natural experiment setting is exploited to develop a unique dataset of oyster consumer actual a... more A natural experiment setting is exploited to develop a unique dataset of oyster consumer actual and anticipated behavior immediately prior to and following the BP Deepwater Horizon oil spill. Using data from a repeat sample of oyster consumers, a pre and post-spill revealed and stated preference model allows both a short and longer-term response to the spill to be investigated. Findings indicate that, as expected, the BP spill had a negative impact on oyster demand in terms of short-run actual behavior, although spill effects show signs of dissipating several months following the spill. However, by accounting for unobserved heterogeneity in the sample, findings further indicate that short and longer-term spill responses differ across consumer groups. For the larger consumer groups, the negative spill effects continue over the longer-term horizon, while other groups are either non-responsive or increase consumption following news of the spill.
Economic interdependence between nations has been the focus of considerable research. A particula... more Economic interdependence between nations has been the focus of considerable research. A particular avenue of international interrelationship that has received a great deal of recent attention is the integration of international stock markets. Increased trade between nations implies that domestic corporate profitability will be influenced by economic conditions in other countries. If international influence is widespread between particular markets then it is likely that measures of overall market performance will be related.
Page 1. THE JOURNAL OF INDUSTRIAL ECONOMICS 0022-1821 $2.00 Volume XXXVII June 1989 No. 4 THE IMP... more Page 1. THE JOURNAL OF INDUSTRIAL ECONOMICS 0022-1821 $2.00 Volume XXXVII June 1989 No. 4 THE IMPACT OF ANTITRUST LITIGATION ON SHAREHOLDER RETURN* WILLLAM L. HuTH and DON N. MACDONALD ...
In a single-site travel cost model framework, revealed and stated preference data are jointly est... more In a single-site travel cost model framework, revealed and stated preference data are jointly estimated to provide the first use-value estimate associated with recreational cave diving. Focusing on one of Florida's first magnitude springs, we estimate average perperson per-trip use values of approximately $155, generating annual cave diving use values in the region of $1075. Further, in an investigation of potential site quality changes, we find that divers are sensitive to scope effects with an additional cave system increasing annual per-person use values by approximately $100, while improved access yields an additional $50 in per-person annual consumer surplus. Finally, three additional model specifications are estimated and indicate that divers use different travel cost preferences when assessing their revealed and stated preference trip counts but a single preference structure to evaluate site quality changes.
Using data drawn from a web-based travel cost survey, we jointly model revealed and stated prefer... more Using data drawn from a web-based travel cost survey, we jointly model revealed and stated preference trip count data in an attempt to estimate the recreational use value from diving the intentionally sunk USS Oriskany. Respondents were asked to report their: (i) actual trips from the previous year, (ii) anticipated trips in the next year, and (iii) anticipated trips next year assuming a second diveable vessel (a Spruance class destroyer) is sunk in the same vicinity. Results from several different model specifications indicate average per-person, per-trip use values range from
Fresh water springs are unique natural resources that are contained within public lands across th... more Fresh water springs are unique natural resources that are contained within public lands across the United States. Natural resource management on public lands generates many interesting policy issues as the competing goals of conservation, recreational opportunity provision, and revenue generation often clash. As demand for recreational cave diving sites increases, this article provides natural resource site managers with the first statistical estimate of divers' willingness to pay (WTP) to dive cave and cavern systems. Using a contingent valuation model (CVM) and correcting for hypothetical bias, we find that divers' median WTP for cave diving opportunities at the site of interest is between $52 and $83 per dive. Model results also provide weak evidence of diver sensitivity with respect to scope, as individuals are willing to pay more for dives that are judged to be higher in quality.
The liquidity component from financial analysis has been found to be an important predictor of a ... more The liquidity component from financial analysis has been found to be an important predictor of a firm's financial well being. Altman's credit worthiness and financial viability system uses, among six other financial measures, the current ratio as a liquidity discriminant variable. The Altman system itself has had considerable success in the prediction of corporate bankruptcy. Altman reported that the system correctly predicted bankruptcy 93% of the time using financial statements one period prior to failure and 87% with financial statements two periods prior. The Value Line Investment Survey also contains a measure of financial strength that incorporates a liquidity measure.
The standard capital market event study is used to measure Japanese firm-specific effects resulti... more The standard capital market event study is used to measure Japanese firm-specific effects resulting from action taken by the US in response to alleged dumping of Japanese imports in US markets. Empirical findings are that winners and losers in the process differ predictably from each other and from the market in the way that Japanese investors view them, with differences
Abstract This article reports experiments dealing with individual subject valuation and preferenc... more Abstract This article reports experiments dealing with individual subject valuation and preference over prospect pairs that are known to generate systematic intransitivities in choice behavior termed “preference reversals”. The authors examine whether alternative procedures to those previously employed for eliciting individual limit selling prices over prospects alters the incidence or dollar magnitude of preference reversals. It is found that when individual limit selling prices over prospects are elicited in a repetitive, second-price sealed Vickrey (1961) auction market framework, rather than under the traditional single response Becker, DeGroot, and Marshak (1964) procedure, that the dollar magnitude of preference reversals declines significantly. Initially, when opening Vickrey auction limit selling prices are combined with individual subject choices over prospects, previous results like those of Grether and Plott (1979) are obtained. When ending Vickrey auction limit selling prices are combined with individual subject choices over prospects, the dollar magnitude of reversals declines significantly. These results imply that markets can be efficient and yield market clearing prices under a given arrangement of property rights even if the behavior of some individuals is inconsistent with expected utility theory.
Page 1. SHORTER ARTICLES Flood Hazard Pricing and Insurance Premium Differentials: Evidence From ... more Page 1. SHORTER ARTICLES Flood Hazard Pricing and Insurance Premium Differentials: Evidence From the Housing Market Don N. MacDonald, Harry L. White, Paul M. Taube and William L. Huth* Abstract In this article, a ...
The Bureau of Economic Analysis (BEA) regularly publishes data on the current state and anticipat... more The Bureau of Economic Analysis (BEA) regularly publishes data on the current state and anticipated future of the domestic economy. This information is frequently used, mainly in a qualitative sense, by policymakers and other economic agents to assess the direction of economic activity. This paper examines the quantitative time interrelationships between the composite economic indicators. Specifically, crosscorrelations were computed from the white noise innovations from univariate AR-IMA models and used to isolate the delay behavior and directional relation between the series pairs. The correlations were also used to specify a multivariate time series model connecting the coincident and leading indexes of economic activity. *A debt of gratitude is owed to the anonymous referees for their comments and suggestions and to Northeastern University, Boston, where a major portion of the research took place.
The effect of union decertification elections on the valuation of corporations is examined using ... more The effect of union decertification elections on the valuation of corporations is examined using a standard event study methodology. Cumulative abnormal daily common stock returns for 203 NYSE and AMEX listed firms are estimated for the day on which apetition for a decertification election is filed and for the day on which the National Labor Relations Board (NLRB) certifies the decertification election outcome. The results are consistent with the hypothesis that successful union decertifications increase firm valuation and unsuccessful ones reduce firm valuation. The primary carrier of valuation information is the date the NLRB confirms the decertification election results. The petition file date yields little, if any, information about the firm "s capitalization.
Abstract A theoretical framework is presented for analyzing psychological, perceptual, or expecta... more Abstract A theoretical framework is presented for analyzing psychological, perceptual, or expectational effects on household expenditure within a complete demand system that is also consistent with household utility-maximizing behavior. The model was estimated with the Consumer Sentiment Index (CSI), which represents an index of consumer perceptions of future economic conditions, and was re-estimated for several CSI components separately. From the CSI, evidence was found for significant expectational effects for 4 of the 11 expenditure categories: alcohol, housing services, durable goods, and other services. The results demonstrate the model's potential usefulness for both demand forecasting and policy analysis.
In this paper a series of experiments are reported using human subjects choosing over distributio... more In this paper a series of experiments are reported using human subjects choosing over distributions of negative expected value. The experiments were designed to examine preference reversals and fanning out type violations of expected utility theory. Each subject was endowed with an initial wealth position and asked to choose between lotteries in which they were forced, if they lost, to forfeit a portion of their fixed endowment. Consistent and systematic violations of expected utility theory were found within the loss domain which were a mirror reflection of those found within the gain domain. Preference reversals were also present over losses, but the reversal rate was lower than the rate for prospects with positive expected value. No relationship between fanning out type violations of expected utility theory and preference reversals was found, in contrast to recent theoretical predictions. *The advice of Ray Battalio, John Kagel and Jerry L. Wall, and the valuable research assistance of Becky Allen and Lesa Lawrence are gratefully acknowledged. The financial support of Northeast Louisiana University and the University of North Texas was essential to the research reported here. Any remaining errors or omissions are the sole responsibility of the authors. 'See Machina (1983b, 1987) for a review of experimental evidence on the independence axiom.
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