Tests of 'Fanning Out' of Indifference Curves: Results from

In earlier research, Allais-type violations of the independence axiom of expected utility theory were reported with rats choosing over positively valued payoffs. In extending this research, animals' choices over losses are examined, testing for: 1. standard Allais-type common ratio effect violations of expected utility theory, and 2. fanning out of indifference curves for random prospects, tests of Machina's hypothesis II over previously unexplored areas of the unit probability triangle. A parallel series of experiments using human subjects choosing over real losses is also conducted. For both rats and people, classic Allais-type violations of expected utility theory are found. In addition, there is a systematic failure of the fanning out hypothesis in the southeast corner of the unit probability triangle in the case of losses, contrary to Machina's hypothesis. Thus, the fanning out hypothesis cannot provide a satisfactory explanation of behavioral deviations from expected utility theory.