Stochastic dominance and demand for surprise by Severine Toussaert

Join us for this week's event in the Experimental Economics Seminar Series, Autumn Term 2023

Join Severine Toussaert, from St John's College Oxford, as they present their research on Stochastic dominance and demand for surprise.

Abstract

Decision theorists usually take a normative view on stochastic dominance: a decision maker who chooses a dominated lottery must be making a mistake. This paper provides evidence that stochastic dominance violations may naturally occur in situations where anticipatory utility is high, such as going on a holiday trip. In such a situation, the decision maker may trade the certainty of going to his favorite destination for the excitement of not knowing where he will go. To document this phenomenon, I conduct an experiment in which participants make a series of binary choices between a sure destination and a "surprise lottery'' over holiday trips, with the lottery outcome revealed close to the date of travel. I vary lottery characteristics to understand when violations are most likely to occur and analyze their properties. I discuss the implications for the design of "surprise goods'' and the modelling of anticipatory utility.

This seminar will be held in the Economics Common Room on Wednesday 13th December 2023 at 11.00am. This event is open to all levels of study and is also open to the public. To register your place, please contact the seminar organisers.

This event is part of the Experimental Economics Research Seminar Series.