DOMINANCE VIOLATIONS IN JUDGED PRICES OF 2-OUTCOME AND 3-OUTCOME GAMBLES

The dominance principle states that one should prefer the option with consequences that are at least as good as those of other options for a ny state of the world. When applied to judged prices of gambles, the d ominance principle requires that increasing one or more outcomes of a gamble should increase the judged price of the gamble, with everything else held constant. Previous research has uncovered systematic violat ions of the dominance principle: people assign higher prices to a gamb le with a large probability of winning an amount, Y, otherwise zero, t han they do to a superior gamble with the same chance of winning Y,oth erwise winning a small amount, X! These violations can be explained by a configural-weight theory in which two-outcome gambles are represent ed with two sets of decision weights; one set for outcomes having valu es of zero and another set for lower-valued outcomes that have nonzero values. The present paper investigates whether dominance violations a re limited to two-outcome gambles. Results show that people violate th e dominance principle with three-outcome gambles even with financial i ncentives. Furthermore, results could be predicted from the configural -weight theory. The data do not support the view that configural weigh ting is caused by a shift in strategy that would apply only to two-out come gambles.