Abstract
We construct and run an experiment to test the most basic choice effect pre-
dicted by Salience Theory. Subjects allocate wealth between a risky and a safe
investment. While we vary an apparent payoff ratio to influence salience, treat-
ments have economically equivalent consequences. Most other theories of behavior
then predict zero effect. Our experimental findings are strongly consistent with
the behavioral implication of a continuous version of Salience Theory. We provide
a novel structural estimate on the strength of salience. In our setting, increasing
the relative payoff contrast by one percent is equivalent to an increased odds ratio
by about 0.4 percent.
dicted by Salience Theory. Subjects allocate wealth between a risky and a safe
investment. While we vary an apparent payoff ratio to influence salience, treat-
ments have economically equivalent consequences. Most other theories of behavior
then predict zero effect. Our experimental findings are strongly consistent with
the behavioral implication of a continuous version of Salience Theory. We provide
a novel structural estimate on the strength of salience. In our setting, increasing
the relative payoff contrast by one percent is equivalent to an increased odds ratio
by about 0.4 percent.
| Originalsprog | Engelsk |
|---|---|
| Tidsskrift | Review of Economics and Statistics |
| ISSN | 0034-6535 |
| DOI | |
| Status | Udgivet - 2024 |