How Certain Is The Uncertainty Effect?

The authors replicate three pricing tasks of Gneezy, List and Wu (2006) for which they document the so-called uncertainty effect, namely, that people value a binary lottery over non-monetary outcomes less than other people value the lottery's worse outcome. While the authors implemented a verbal lottery description, they use a physical lottery format which makes misinterpretation of the lottery structure highly unlikely. They also provide subjects with complete information about the goods they are to value (book gift certificates and one-year deferred payments). Contrary to Gneezy et al. (2006), they observe for all three pricing tasks that subjects' willingness to pay for the lottery is significantly higher than other subjects' willingness to pay for the lottery's worse outcome.