ABSTRACT

There is extensive research showing that people underweight rare event when making decisions from experience in individual context. In one recent study, participants played a two-player game with repeated interaction in which one of the players faced potential rare outcomes. Results from this study indicated that participants behaved as if they underweight rare events even in strategic interactions. Yet, it was unclear whether and to what extant the behavior of the strategic setting is fundamentally different than behavior in individual choice tasks. Moreover, because the experiment was conducted in an online setting where the level of anonymity is high, we hypothesized that the level of other regarding preferences participants exhibited was especially low. To better understand these results, In the present study we seek to disentangle the behavior to three components. To do so this study included three conditions, an individual condition to measure basic outcome-based preferences, a dictator condition to measure other regarding preferences, and a condition that includes a strategic interaction which is a replication of the previous study. This study was conducted both in a lab setting and in an online setting. Results could indicate that the behavior in the strategic interaction, similar to the individual condition includes underweighting of rare events. The results could also indicate that the degree of other regarding preferences in the strategic interaction is proportional to that measured in the dictator condition, in addition a strategic component was found in the strategic interaction. Furthermore, Contrary to our hypothesis, results could indicate that the degree of other regarding preferences is greater in an online setting than in a lab setting.