Risk aversion and Incoherence bias: Distortion between Sequential and Simultaneous Responses

Consistent behaviours are a fundamental requirement of Expected Utility Theory (EUT). Individual’s decisions in non-strategic experiments should not be sensitive to the way experiments are framed. In the context of a random lottery procedure, subjects adhering to EUT should consider questions separately instead of regarding questions as a whole experience, which entails the best strategy to win. Hey and Lee (2005) argued that “If the subjects consider the questions as a whole, their best response to an individual question may not be the same response as would be given if the experiment consisted of just that one question”. Subsequently, subject’s responses will suffer from a kind of inconsistency due to the incoherence of preferences. This paper presents a new evidence of the role of framing in the context of a lottery-choice experiment, using Holt and Laury (2002)'s elicitation method as a baseline treatment. We check for incoherence biases, more especially non-stochastic preferences, by running several treatments in which we varied the order of the decisions (simultaneous or sequential presentation of the same paired lotteries) and the way the probabilities are ranged (in an increasing, decreasing or random manner). Our results indicate that framing affects both the level of inconsistencies an