The Disjunction Effect: Does It Exist for Two-Step Gambles?

Abstract

One of the basic axioms of the rational theory of decision under uncertainty is Savage's (1954) Sure Thing Principle. It states that if Prospect x is preferred to Prospect y knowing that Event A occurred, and if x is preferred to y knowing that A did not occur, then x should also be preferred to y when it is not known whether A occurred. Tversky and Shafir (1992) claim to have demonstrated a violation of this principle in two-step gambles, which is termed a disjunction effect. The present article evaluates the replicability of the disjunction effect for two-step gambles. The findings show that people do not violate the sure thing principle in repeated gambles. The validity of alleged violations in other paradigms is discussed. © 2001 Academic Press.