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Menu-dependent risk attitudes: Theory and evidence

Author

Listed:
  • Zhuo Chen

    (Shandong University)

  • Russell Golman

    (Carnegie Mellon University)

  • Jason Somerville

    (Federal Reserve Bank of New York)

Abstract

We test for a novel pattern of menu-dependent risk attitudes that forms the basis of recent theories of risky choice: Does expanding the range of potential prizes from lotteries in a choice set lead people to overweight those prizes and make riskier choices? Contrary to our hypothesis, we find no evidence of such a menu effect. Varying the potential prize offered by an actuarially unfavorable, high-risk lottery does not affect the likelihood of choosing a different, moderate-risk gamble in favor of a safer alternative. Our well-powered null results cast doubt on prominent theories of menu-dependent risk preferences.

Suggested Citation

  • Zhuo Chen & Russell Golman & Jason Somerville, 2024. "Menu-dependent risk attitudes: Theory and evidence," Journal of Risk and Uncertainty, Springer, vol. 68(1), pages 77-105, February.
    • Handle: RePEc:kap:jrisku:v:68:y:2024:i:1:d:10.1007_s11166-023-09423-1
    DOI: 10.1007/s11166-023-09423-1
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    More about this item

    Keywords

    Focusing; Menu Dependence; Risk Attitudes;
    All these keywords.

    JEL classification:

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

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