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The stochastic component in choice and regression to the mean

García-Gallego, A., Georgantzis, N., Navarro-Martínez, D. and Sabater-Grande, G. (2011) The stochastic component in choice and regression to the mean. Theory and Decision, 71 (2). pp. 251-267. ISSN 0040-5833

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To link to this item DOI: 10.1007/s11238-010-9223-6

Abstract/Summary

In this article, we illustrate experimentally an important consequence of the stochastic component in choice behaviour which has not been acknowledged so far. Namely, its potential to produce ‘regression to the mean’ (RTM) effects. We employ a novel approach to individual choice under risk, based on repeated multiple-lottery choices (i.e. choices among many lotteries), to show how the high degree of stochastic variability present in individual decisions can distort crucially certain results through RTM effects. We demonstrate the point in the context of a social comparison experiment.

Item Type:Article
Refereed:Yes
Divisions:Faculty of Life Sciences > School of Agriculture, Policy and Development > Economic and Social Sciences Division > Food Economics and Marketing (FEM)
ID Code:34777
Publisher:Springer

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