Risk Attitudes of Children and Adults: Choices Over Small and Large Probability Gains and Losses
AbstractIn this paper we examine how risk attitudes change with age. We present participants from age 5 to 64 with choices between simple gambles and the expected value of the gambles. The gambles are over both gains and losses, and vary in the probability of the non-zero payoff. Surprisingly, we find that many participants are risk seeking when faced with high-probability prospects over gains and risk averse when faced with small-probability prospects. Over losses we find the exact opposite. Children's choices are consistent with the underweighting of low-probability events and the overweighting of high-probability ones. This tendency diminishes with age, and on average adults appear to use the objective probability when evaluating risky prospects. Copyright Kluwer Academic Publishers 2002
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Bibliographic InfoArticle provided by Springer in its journal Experimental Economics.
Volume (Year): 5 (2002)
Issue (Month): 1 (June)
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Web page: http://www.springerlink.com/link.asp?id=102888
probability weighting; subjective expected utility; prospect theory; children; risk;
Other versions of this item:
- William T. Harbaugh & Kate Krause & Lise Vesterlund, 1999. "Risk attitudes of children and adults: choices over small and large probability gains and losses," University of Oregon Economics Department Working Papers 1999-2, University of Oregon Economics Department.
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
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