VIOLATIONS OF MONOTONICITY AND CONTEXTUAL EFFECTS IN CHOICE-BASED CERTAINTY EQUIVALENTS

This article investigates choices between gambles and amounts of money to explore two issues in decision making. First, in recent studies, judgments of the values of gambles violated monotonicity (dominance), yet choices between the same gambles satisfied monotonicity, producing reversals of preference. This experiment tested whether certainty equivalents based on choices between gambles and money would violate monotonicity. Results indicated that these choices violated monotonicity in the same way as had judgments. Second, this experiment investigated whether the certainty equivalent of a gamble would depend on the distribution of amounts offered for comparison. It was found that certainty equivalents based on choices depended on the context in the same fashion as psychophysical comparisons. Apparently, paradoxes of behavioral decision making are not eliminated by using choices instead of judgments to investigate human preferences.