What Is the Role of Transparency in Cancellation?

Abstract

A series of experiments is reported in which the cancellation axiom is investigated by manipulating the transparency of gamble option formulations. The findings suggest that previous demonstrations of violations of the cancellation axiom might not be conclusive. While violations in nontransparent conditions have led to substantial changes in expected utility (EU) theory, the present data suggest that violations in transparent conditions require a fundamental change in the models that have been suggested as alternatives to EU theory.