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Probability Weighting and Cognitive Ability
Cited 4 time in
Web of Science
Cited 4 time in Scopus
- Authors
- Issue Date
- 2022-07
- Citation
- Management Science, Vol.68 No.7, pp.5201-5215
- Abstract
- Probability weighting is a major concept for accommodating systematic departures from expected utility theory. We examine the relation between probability weighting and cognitive ability with two experiments: one recruiting subjects with a large variation in cognitive ability and the other using the within-subject manipulation of time constraints in lottery choices and cognitive tests. We find a significant association between likelihood insensitivity-the cognitive component of probability weighting-and cognitive limitation such that subjects with a lower cognitive score or more interrupted cognition due to time pressure respond less discriminately to intermediate probabilities and more over-sensitively to extreme probabilities. Our findings shed light on the sources of anomalous choices against expected utility theory.
- ISSN
- 0025-1909
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