TESTING FOR JUXTAPOSITION AND EVENT-SPLITTING EFFECTS

Regret theory predicts that choices over prospects will be systematica lly influenced by the juxtaposition of outcomes in the payoff matrix. Experiments have found apparent juxtaposition effects of this kind. Ho wever, these experiments have not controlled for ''event-splitting eff ects'' (ESEs), by which the subjective weight given to an outcome depe nds on the number of states of the world in which it occurs, as well a s on their combined probability. An experiment is reported that tests independently for juxtaposition effects and ESEs. The results suggest that the apparent juxtaposition effects found in previous experiments are largely due to ESEs.