Learning your own risk preferences

Springer Science and Business Media LLC - Tập 67 - Trang 1-19 - 2023
Gary Charness1, Nir Chemaya1, Dario Trujano-Ochoa1
1University of California, Santa Barbara USA

Tóm tắt

Do people know their own risk preferences, or do risk choices change with experience and observation? We provide a straightforward test in the laboratory. People make an initial decision concerning a lottery choice and then experience 24 unpaid practice periods in which they roll the dice, record the outcome, and record the would-be payoff. They then make a final decision for the lottery choice; one of the first and last periods is randomly chosen for payment. Our primary hypothesis is that people will become less risk-averse by having made and experienced the practice rolls. We do find that people are significantly more likely to become less risk-averse than more risk-averse over time. We note that this move towards assuming increased risk goes in the opposite direction from what is at least arguably predicted by loss aversion and reference dependence. We find that women’s preferences change much less during a session than men’s preferences change. We feel that our literally hands-on approach ensures a degree of engagement that helps to accelerate the learning process. We argue that measures obtained after people have had experience with a mechanism are more meaningful, and that this principle might well extend more generally to other elicitation tasks.

Tài liệu tham khảo

Beine, M., Charness, G., Dupuy, A., & Joxhe, M. (2020). Shaking things up: on the stability of risk and time preferences. CESifo. Working Paper No. 8187.

Bennett, C. M., Baird, A. A., Miller, M. B., & Wolford, G. L. (2010). Neural correlates of interspecies perspective taking in the post-mortem Atlantic Salmon: an argument for proper multiple comparisons correction. Journal of Serendipitous and Unexpected Results, 1(1), 1–5.

Binswanger, H. P. (1981a). Attitudes toward risk: Experimental measurement in rural India. American Journal of Agricultural Economics, 62(3), 395–407.

Binswanger, H. P. (1981b). Attitudes toward risk: Theoretical implications of an experiment in rural India. The Economic Journal, 91(364), 867-890.

Bradbury, M. A. S., Hens, T., & Zeisberger, S. (2015). Improving investment decisions with simulated experience. Review of Finance, 19(3), 1019–1052. https://doi.org/10.1093/rof/rfu021

Charness, G., Garcia, T., Offerman, T., & Villeval, M. C. (2020). Do measures of risk attitude in the laboratory predict behavior under risk in and outside of the laboratory? Journal of Risk and Uncertainty, 60(2), 99–123.

Charness, G., & Gneezy, U. (2012). Strong evidence for gender differences in risk taking. Journal of Economic Behavior and Organization, 83(1), 50–58.

Charness, G., Gneezy, U., & Imas, A. (2013). Experimental methods: eliciting risk preferences. Journal of Economic Behavior and Organization, 87, 43–51. https://doi.org/10.1016/J.JEBO.2012.12.023

Crosetto, P., & Filippin, A. (2013). The “bomb” risk elicitation task. Journal of Risk and Uncertainty, 47, 31–65.

Dave, C., Eckel, C. C., Johnson, C. A., & Rojas, C. (2010). Eliciting risk preferences: when is simple better? Journal of Risk and Uncertainty, 41(3), 219–243.

Delaney, J., Jacobson, S., & Moenig, T. (2019). Preference discovery. Department of Economics Working Paper 2019–08, Department of Economics, Williams College, revised Jul 2019.

Dohmen, T., Falk, A., Huffman, D., & Sunde, U. (2010). Are risk aversion and impatience related to cognitive ability? American Economic Review, 100(3), 1238–1260.

Eckel, C. C., El-Gamal, M., & Wilson, R. (2009). Risk loving after the storm: A Bayesian-Network study of Hurricane Katrina evacuees. Journal of Economic Behavior & Organization, 69(2), 110–124.

Eckel, C. C., & Grossman, P. J. (2002). Sex differences and statistical stereotyping in attitudes toward financial risk. Evolution and Human Behavior, 23(4), 281–295.

Eckel, C. C., & Grossman, P. J. (2008). Forecasting risk attitudes: An experimental study using actual and forecast gamble choices. Journal of Economic Behavior and Organization, 68(1), 1–17.

Engelmann, D., & Hollard, G. (2010). Reconsidering the effect of market experience on the “Endowment Effect.” Econometrica, 78(6), 2005–2019.

Ert, E., & Haruvy, E. (2017). Revisiting risk aversion: can risk preferences change with experience? Economics Letters, 151, 91–95. https://doi.org/10.1016/j.econlet.2016.12.008

Frederick, S. (2005). Cognitive reflection and decision making. Journal of Economic Perspectives, 19(4), 25–42.

Friedman, D., Habib, S., James, D., & Williams, B. (2022). Varieties of risk preference elicitation. Games and Economic Behavior, 133, 58–76.

Friedman, D., Isaac, R. M., James, D., & Sunder, S. (2014). Risky curves: on the empirical failure of expected utility (pp. 1–137). Routledge.

Fudenberg, D., & Levine, D. K. (2006). Superstition and rational learning. American Economic Review, 96(3), 630–651.

Gallistel, C. R. (2012). On rationalism and optimality: Responses to the Miller and Nevin Commentaries. Behavioural Processes, 90(1), 87–88.

Gillen, B., Snowberg, E., & Yariv, L. (2018). Experimenting with measurement error: Techniques with applications to the Caltech cohort study. Journal of Political Economy, 127(4), 1826–1863.

Gneezy, U., & Potters, J. (1997). An experiment on risk taking and evaluation periods. The Quarterly Journal of Economics, 112(2), 631–645.

Gonzalez, R., & Wu, G. (1999). On the shape of the probability weighting function. Cognitive Psychology, 38(1), 129–166.

Greiner, B. (2015). Subject pool recruitment procedures: organizing experiments with ORSEE. Journal of the Economic Science Association, 1(1), 114–125.

Hajikhameneh, A., & Iannaccone, L. (2023). God games : an experimental study of uncertainty, superstition, and cooperation. Games and Economic Behavior, 139, 88–116.

Holt, C. (2019). Markets, Games, and Strategic Behavior (Second edition). Princeton University Press.

Holt, C. A., & Laury, S. K. (2002). Risk aversion and incentive effects. The American Economic Review, 92(5), 1644–1655.

Holt, C. A., & Laury, S. K. (2005). Risk aversion and incentive effects: New data without order effects. The American Economic Review, 95(3), 905–904.

Holt, C. A., & Laury, S. K. (2014). Assessment and estimation of risk and uncertainty. In M. J. Machina & W. K. Viscusi (Eds.), Handbook of the economics of risk and uncertainty (Vol. 1). Oxford: Elsevier.

Holzmeister, F., & Stefan, M. (2019). The risk elicitation puzzle revisited: Across-methods (in)consistency? (Working Papers in Economics and Statistics No. No.2019–19). Innsbruck.

Kahneman, D., & Tversky, A. (1979). Prospect theory: an analysis of decision under risk. Econometrica, 47(2), 263–292.

Miller, J. B., & Sanjurjo, A. (2018). Surprised by the hot hand fallacy? A truth in the law of small numbers. Econometrica, 86(6), 2019–2047.

Neumann, N., Böckenholt, U., & Sinha, A. (2016). A meta-analysis of extremeness aversion. Journal of Consumer Psychology, 26(2), 193–212.

Pedroni, A., Frey, R., Bruhin, A., Dutilh, G., Hertwig, R., & Rieskamp, J. (2017). The risk elicitation puzzle. Nature Human Behaviour, 1(11), 803–809. https://doi.org/10.1038/s41562-017-0219-x

Plott, C. (1996). Rational Individual Behavior in Markets and Social Choice Processes: The Discovered Preference Hypothesis. The Rational Foundations of Economic Behaviour (pp. 225–250). McMillian.

Reynaud, R., & Aubert, C. (2020). Does flood experience modify risk preferences? Evidence from an artefactual field experiment in Vietnam. The Geneva Risk and Insurance Review, 45(1), 36–74.

Thông tin
Thông tin xuất bản

Springer Science and Business Media LLC

Tập 67

1-19

Thông tin tác giả