The Review of Economics and Statistics Vol. 107 No. 6 2025
An Experimental Analysis of the Prize–Probability Trade-Off in Stopping Problems
Abstract
We experimentally examine how individuals commit to a cutoff stopping rule when facing a sequence of independent lotteries. We identify two main behavior patterns: (a) a small share of participants consistently choose stopping rules whose gain bound (i.e., the accumulated gain at which the sequence stops) is larger than the loss bound, and (b) a larger share of participants consistently choose rules whose loss bound is larger than the gain bound. We introduce a procedural choice model that accounts for these patterns and show that the behavior of most of our participants is inconsistent with prominent theories of decision under risk.
- DOI
- 10.1162/rest_a_01366
- Volume
- 107
- Issue
- 6
- Pages
- 1588-1602
- Language
- en
- Sources
- openalex crossref