Publications
Publications
- 2024
- HBS Working Paper Series
How Real Is Hypothetical?: A High-Stakes Test of the Allais Paradox
By: Uri Gneezy, Yoram Halevy, Brian Hall, Theo Offerman and Jeroen van de Ven
Abstract
Researchers in behavioral and experimental economics often argue that only
incentive-compatible mechanisms can elicit effort and truthful responses from participants.
Others argue that participants make less-biased decisions when the stakes
are sufficiently high. Are these claims correct? We investigate the change in behavior
as incentives are scaled up in the Allais paradox, and document an increase, not
decrease, in deviations from expected utility with higher stakes. We also find that
if one needs to approximate participants’ behavior in real high-stakes Allais (which
are often too expensive to conduct), it is better to use hypothetically high stakes
than real low stakes, as is typically the practice today.
Keywords
Citation
Gneezy, Uri, Yoram Halevy, Brian Hall, Theo Offerman, and Jeroen van de Ven. "How Real Is Hypothetical? A High-Stakes Test of the Allais Paradox." Harvard Business School Working Paper, No. 25-005, August 2024.