CeDEx 2010-01: Are Bygones Bygones?

Abstract

The paper reports an experiment which tests the principle of separability, i.e. that behaviour in a dynamic choice problem is independent of history and of unreachable eventualities. Although this is a well-known principle of orthodox decision theory and central to conventional economic modelling, it has been questioned on grounds suggested by non-expected utility models of choice under risk and by the psychology of affective influences on risk-taking. Our experimental design, which provides between-subjects tests of separability using three treatments in which the history preceding a decision is manipulated, is inspired by these concerns. We expose separability to a clean and harsh test, but find no evidence that it is violated.

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Revised version of 2005-21). January 2010.

A revised version is now published in Theory and Decision 2012;75:185-282

Authors

Robin Cubitt, Maria Ruiz-Martos and Chris Starmer

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