The next RITM Economics Seminar will take place on Monday 13 November, in Imbert (Jean Monnet – 54 boulevard Desgranges – 92330 Sceaux) from 12:00 to 13:00.
Emanuel Vespa ((UC Santa Barbara) will present “Probabilistic States versus Multiple Certainties: The Obstacle of Risk in Contingent Reasoning” (with Alejandro Martinez-Marquina and Muriel Niederle)
Abstract:  We propose a new hypothesis, the Power of Certainty , to help explain agents’ difficulties in making choices when there are multiple possible payoff-relevant states. In the probabilistic ‘Acquiring-a-Company’ problem an agent submits a price to a firm before knowing whether the firm is of low or high value. We construct a deterministic problem with a low and high value firm, where the agent submits a price that is sent to each firm separately. Subjects are much more likely to use dominant strategies in deterministic than in probabilistic problems, even though computations for profit maximization are identical for risk-neutral agents.