Randomization preference and the reversal of order axiom

This paper tests, experimentally, three different perspectives on the relationship between preferences for randomization and the timing of resolution of uncertainty in ambiguous environments. We consider the canonical Expected Utility model, where there is no preference for randomization, Raiffa’s (Quarterly Journal of Economics,75(4), 690–694, 1961) model, where preference for randomization is independent of the timing of resolution of uncertainty, and modern theories from Ke and Zhang (Econometrica,88(3), 1159–1195, 2020) and Saito (American Economic Review,105(3), 1246–1271, 2015), where preference for randomization depends on the timing of resolution of uncertainty. Our experimental results show a strong preference for randomization, including substantial violations of first order stochastic dominance, but are not consistent with any of the theories considered.