Experiments have shown that people's evaluations of probabilistic outcomes do not conform to normative theory, especiallywhen they are asked to provide the probability that a single, isolated event will occur. However, there is evidence that people responddifferently when probabilities refer to unique rather than multiply occurring events. This project explores whether the observed discrepancies are tied to situations in which probabilities apply to events that occur only once. This work is important because it will provide information on the generalizability of the conclusion that decision makers generally violate expected utility theory when making actual choices. The study will investigate whether framing risky prospects as multiply occurring events induces a long run perspective that results in the processing of probabilistic information more in accordance with normative principles. Consistent with this hypothesis is recent evidence found by the investigators and others that some of the systematic violations of normative theory are reduced when subjects evaluate multiply occurring prospects. A series of experiments will beconducted to investigate people's responses to single and multiply occurring events. The first two experiments examine the impact of the option of multiple play on subjective utilities and probabilities. Another experiment looks at the question of whether opportunity for multiple play reduces framing effects. A final experiment will examine how experienced experimental subjects perceive probabilistic events ina financial audit context.
