Moderate stake variations for risk and uncertainty, gains and losses: Methodological implications for comparative studies
AbstractRisk attitudes are known to be sensitive to large stake variations. However, little is known on the sensitivity to moderate variations in stakes. This is important for studies that want to compare risk attitudes between countries or over time. I find that variations of ±20% affect only utility, while larger variations may affect also probability weighting. Surprisingly, the effect on weighting functions is larger for losses than for gains. It is also more pronounced for risk than for uncertainty.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 117 (2012)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/ecolet
Prospect theory; Stake effects; Experimental methodology;
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kachelmeier, Steven J & Shehata, Mohamed, 1992. "Examining Risk Preferences under High Monetary Incentives: Experimental Evidence from the People's Republic of China," American Economic Review, American Economic Association, vol. 82(5), pages 1120-41, December.
- Mathieu Lefebvre & Ferdinand Vieider & Marie-Claire Villeval, 2009.
"Incentive Effects on Risk Attitude in Small Probability Prospects,"
0926, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- Lefebvre, Mathieu & Vieider, Ferdinand M. & Villeval, Marie Claire, 2010. "Incentive effects on risk attitude in small probability prospects," Economics Letters, Elsevier, vol. 109(2), pages 115-120, November.
- Mathieu Lefebvre & Ferdinand Vieider & Marie-Claire Villeval, 2009. "Incentive Effects on Risk Attitude in Small Probability Prospects," Post-Print halshs-00435957, HAL.
- Lefèbvre, Mathieu & Vieider, Ferdinand M. & Villeval, Marie Claire, 2009. "Incentive Effects on Risk Attitude in Small Probability Prospects," IZA Discussion Papers 4545, Institute for the Study of Labor (IZA).
- Mathieu Lefebvre & Ferdinand Vieider & Marie Claire Villeval, 2010. "Incentive Effects on Risk Attitude in Small Probability Prospects," Post-Print halshs-00550469, HAL.
- Robin M. Hogarth & Hillel J. Einhorn, 1990. "Venture Theory: A Model of Decision Weights," Management Science, INFORMS, vol. 36(7), pages 780-803, July.
- Mohammed Abdellaoui & Han Bleichrodt & Olivier L’Haridon, 2008. "A tractable method to measure utility and loss aversion under prospect theory," Journal of Risk and Uncertainty, Springer, vol. 36(3), pages 245-266, June.
- Mohammed Abdellaoui & Aurelien Baillon & Laetitia Placido & Peter P. Wakker, 2011. "The Rich Domain of Uncertainty: Source Functions and Their Experimental Implementation," American Economic Review, American Economic Association, vol. 101(2), pages 695-723, April.
- Grant, Simon & Chateauneuf, A. & Eichberger, J., 2002.
"Choice under Uncertainty with the Best and Worst in Mind: Neo-additive Capacities,"
2002-10, Rice University, Department of Economics.
- Chateauneuf, Alain & Eichberger, Jurgen & Grant, Simon, 2007. "Choice under uncertainty with the best and worst in mind: Neo-additive capacities," Journal of Economic Theory, Elsevier, vol. 137(1), pages 538-567, November.
- Chateauneuf, Alain & Eichberger, Jürgen & Grant, Simon, 2003. "Choice under Uncertainty with the Best and Worst in Mind: Neo-additive Capacities," Sonderforschungsbereich 504 Publications 03-10, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
- Johansson-Stenman, Olof & Mahmud, Minhaj & Martinsson, Peter, 2005.
"Does stake size matter in trust games?,"
Elsevier, vol. 88(3), pages 365-369, September.
- Helga Fehr-Duda & Adrian Bruhin & Thomas Epper & Renate Schubert, 2010.
"Rationality on the rise: Why relative risk aversion increases with stake size,"
Journal of Risk and Uncertainty,
Springer, vol. 40(2), pages 147-180, April.
- Helga Fehr-Duda & Adrian Bruhin & Thomas Epper & Renate Schubert, 2007. "Rationality on the Rise: Why Relative Risk Aversion Increases with Stake Size," SOI - Working Papers 0708, Socioeconomic Institute - University of Zurich, revised Feb 2008.
- Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
- Nathalie Etchart-Vincent & Olivier l’Haridon, 2011.
"Monetary incentives in the loss domain and behavior toward risk: An experimental comparison of three reward schemes including real losses,"
Journal of Risk and Uncertainty,
Springer, vol. 42(1), pages 61-83, February.
- Nathalie Etchart-Vincent & Olivier L'Haridon, 2011. "Monetary incentives in the loss domain and behavior toward risk: An experimental comparison of three reward schemes including real losses," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) hal-00742027, HAL.
- Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
- Mohammed Abdellaoui & Olivier L’Haridon & Horst Zank, 2010. "Separating curvature and elevation: A parametric probability weighting function," Journal of Risk and Uncertainty, Springer, vol. 41(1), pages 39-65, August.
- Vieider, Ferdinand M. & Chmura, Thorsten & Martinsson, Peter, 2012. "Risk attitudes, development, and growth: Macroeconomic evidence from experiments in 30 countries," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2012-401, Social Science Research Center Berlin (WZB).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.