Much of the evidence of violations of Subjective Expected Utility theory (SEU) comes from experiments on individual choice and judgement. In this study, we address the issue whether, in market experiments, there is a tendency for anomalous behavior to disappear or to be reduced as a consequence of market experience and feedback. We empirically test the validity of this assumption by running an auction market for the sale of both risky and uncertain prospects. We compare bidding behavior and prices in market-like settings with valuations obtained from individual pricing tasks. We conclude that, with the repetition of the market experience, there is a tendency for subjective expected utility to perform better. However, economists' general assumption that, in laboratory experiments, poor performance of SEU is due to the lack of financial incentives or to the lack of market-like settings is by no means supported by our data.

Co-author Carmela Di Mauro