A Disruption Experiment

Abstract

We report results from a novel experiment where participants invest an endowment across multiple options, with investment in one option disrupting (reducing) the value of another option. While expected payoff maximization predicts the comparative statics of aggregate investment well, it does not precisely predict investment levels. However, when conditioned on observed investment in a riskless outside option, expected payoff maximization better predicts investment levels. At the participant level, investment variability increases in disruption.