Why choice lists increase risk taking

Abstract

Choice lists with random incentives are widely used for preference elicitation. It is commonly assumed that subjects choose the same option in each question as they would have if it were the only question, but recent findings challenge this assumption. We conduct a large sample experiment varying incentives and presentation independently, and examine choices both near and away from certainty. We consistently find more risk taking when a choice between a safe prize and a risky lottery is embedded in a choice list than when it is presented on its own. This difference remains when we inform subjects of the paid choice in advance, implying that isolation fails not because of the random incentives scheme, but simply because the choice appears in a list together with others. We conjecture that subjects are uncertain about their preferences, reduce this uncertainty through considering the choices that confront them, and make cautious decisions in the interim. Other conditions and non-choice data support this interpretation. Our results open up the possibility that preferences inferred from choice lists offer a better indication of informed preferences than preferences inferred from single choices.