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Risking the future? Measuring risk attitudes towards delayed consequences

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  • Kemel, Emmanuel
  • Paraschiv, Corina

Abstract

This paper presents an experiment that investigates differences in risk attitudes in decisions with immediate versus delayed consequences. Our experimental design allows to control for the effects of discounting and timing of risk resolution. We show that individuals are more risk tolerant in situations involving delayed consequences. Investigations based on rank-dependent utility show that this finding is mainly driven by probability weighting. More precisely, probability weighting is more elevated for delayed consequences. This suggests an overall increase in decision-makers’ optimism regarding the chances of success when consequences materialize in the future.

Suggested Citation

  • Kemel, Emmanuel & Paraschiv, Corina, 2023. "Risking the future? Measuring risk attitudes towards delayed consequences," Journal of Economic Behavior & Organization, Elsevier, vol. 208(C), pages 325-344.
    • Handle: RePEc:eee:jeborg:v:208:y:2023:i:c:p:325-344
    DOI: 10.1016/j.jebo.2023.02.014
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    More about this item

    Keywords

    Risk attitudes; Time; Rank dependent utility; Delay; Future consequences;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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