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Risk Preferences in Decision Making and Cognitive Ability: An Experimental Analysis (in Korean)

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  • Beum-Jo Park

    (Department of Economics, Dankook University)

Abstract

The method of Holt and Laury (2002) has been the most widely used to elicit individual risk preferences in the MPL methods that have a framing effect. In order to reduce the framing effect, this paper designs experiments which are implemented with the program of Visual Basic for Application in MS Excel software. Although recent experimental studies, providing financial incentives, do not support the hypothesis that individuals with higher cognitive ability are less risk averse in decision making, this paper presents a definite evidence on the hypothesis by using the new experimental design and finds interestingly that variables for attitude to life, a religious life and the experience of military service in an interval regression model have a statistically significant effect on individual risk preferences. Further, this paper finds that risk aversion estimated by survey without financial incentives tends to be severely biased toward risk loving.

Suggested Citation

  • Beum-Jo Park, 2015. "Risk Preferences in Decision Making and Cognitive Ability: An Experimental Analysis (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 21(2), pages 63-89, June.
    • Handle: RePEc:bok:journl:v:21:y:2015:i:2:p:63-89
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    More about this item

    Keywords

    Experimental evidence; Framing effect; Measuring risk aversion; Intelligence; Multiple price list(MPL); VBA program; Interval regression model;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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