To maximize or randomize? An experimental study of probability matching in financial decision making.

ABSTRACT: Probability matching, also known as the "matching law" or Herrnstein's Law, has long puzzled economists and psychologists because of its apparent inconsistency with basic self-interest. We conduct an experiment with real monetary payoffs in which each participant plays a computer game to guess the outcome of a binary lottery. In addition to finding strong evidence for probability matching, we document different tendencies towards randomization in different payoff environments-as predicted by models of the evolutionary origin of probability matching-after controlling for a wide range of demographic and socioeconomic variables. We also find several individual differences in the tendency to maximize or randomize, correlated with wealth and other socioeconomic factors. In particular, subjects

SUBMITTER: Lo AW 

PROVIDER: S-EPMC8389367 | biostudies-literature | 2021

REPOSITORIES: biostudies-literature