Changing The Probability Versus Changing The Reward

ASU Author/Contributor (non-ASU co-authors, if there are any, appear on document)
David Bruner Ph.D., Assistant Professor (Creator)
Appalachian State University (ASU )
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Abstract: There are two means of changing the expected value of a risk: changing the probability of a reward or changing the reward. Theoretically, the former produces a greater change in expected utility for risk-averse agents. This paper uses two formats of a risk preference elicitation mechanism under two decision frames to test this hypothesis. After controlling for decision error, probability weighting, and order effects, subjects, on average, are slightly risk averse and prefer an increase in the expected value of a risk due to increasing the probability over a compensated increase in the reward. There is substantial across-format inconsistency but very little within-format inconsistency at the individual level.

Additional Information

Bruner, D. M. (2009). “Changing The Probability Versus Changing The Reward”. Experimental Economics, 12(4), 367-385. [DOI:10.1007/s10683-009-9219-7] Version Of Record Available At
Language: English
Date: 2009
risk, uncertainty, experiments

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