Individual behavior under risk and under uncertainty: An experimental study

These experiments were able to offer to 134 subjects the possibility of actually gaining or losing an important sum of money by exploiting the ‘isolation effect’ and show that under risk as well as under complete ignorance the subjects' attitudes towards prospects of gains and toward prospects of losses are totally unrelated.

Abstract

These experiments are concerned with individual behavior under risk and under uncertainty. By exploiting the 'isolation effect' the experiments were able to offer to 134 subjects the possibility of actually gaining or losing an important sum of money. The experimental data show that under risk as well as under complete ignorance the subjects' attitudes towards prospects of gains and towards prospects of losses are totally unrelated. The data also show that when facing prospects of gains, the subjects generally take the exact probabilities of the events into account, whereas, when facing prospects of losses many of then have only recourse to coarser categories of plausibility, or even no longer use their information at all.