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Measuring Individual Risk Attitudes in the Lab: Task or Ask? An Empirical Comparison

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  • Jan-Erik Lönnqvist
  • Markku Verkasalo
  • Gari Walkowitz
  • Philipp Christoph Wichardt

Abstract

This paper compares two prominent empirical measures of individual risk attitudes - the Holt and Laury (2002) lottery-choice task and the multi-item questionnaire advocated by Dohmen, Falk, Huffman, Schupp, Sunde and Wagner (2011) - with respect to (a) their within-subject stability over time (one year) and (b) their correlation with actual risk-taking behaviour in the lab - here the amount sent in a trust game (Berg, Dickaut, McCabe, 1995). As it turns out, the measures themselves are uncorrelated (both times) and, most importantly, only the questionnaire measure exhibits test-re-test stability (p = .78), while virtually no such stability is found in the lottery-choice task. In addition, only the questionnaire measure shows the expected correlations with a Big Five personality measure and is correlated with actual risk-taking behaviour. The results suggest that the questionnaire is the more adequate measure of individual risk attitudes for the analysis of behaviour in economic (lab) experiments. Moreover, with respect to behaviour in the trust game, we find a high re-test stability of transfers (p = .70). This further supports the conjecture that trusting behaviour indeed has a component which itself is a stable individual characteristic (Glaeser, Laibson, Scheinkman and Soutter, 2000).

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4663.

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Date of creation: 2014
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Handle: RePEc:ces:ceswps:_4663

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Keywords: risk attitudes; trust; personality; lab experiments;

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References

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  1. Thomas Dohmen & Armin Falk, 2011. "Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender," American Economic Review, American Economic Association, American Economic Association, vol. 101(2), pages 556-90, April.
  2. Dohmen Thomas & Falk Armin & Huffman David & Sunde Uwe, 2009. "Are Risk Aversion and Impatience Related to Cognitive Ability?," Research Memorandum 040, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  3. Nigel Nicholson & Emma Soane & Mark Fenton-O'Creevy & Paul Willman, 2005. "Personality and domain-specific risk taking," Journal of Risk Research, Taylor & Francis Journals, Taylor & Francis Journals, vol. 8(2), pages 157-176, March.
  4. Jacob K. Goeree & Charles A. Holt & Thomas R. Palfrey, 2000. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Virginia Economics Online Papers 345, University of Virginia, Department of Economics.
  5. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2012. "The intergenerational transmission of risk and trust attitudes," Munich Reprints in Economics, University of Munich, Department of Economics 20051, University of Munich, Department of Economics.
  6. Matthew Rabin., 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Economics Working Papers, University of California at Berkeley E00-279, University of California at Berkeley.
  7. Ernst Fehr, 2008. "On the Economics and Biology of Trust," SOEPpapers on Multidisciplinary Panel Data Research 154, DIW Berlin, The German Socio-Economic Panel (SOEP).
  8. Charles A. Holt & Susan K. Laury, 2005. "Risk Aversion and Incentive Effects: New Data without Order Effects," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 902-912, June.
  9. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe & Schupp, Jürgen & Wagner, Gert G., 2009. "Individual risk attitudes: Measurement, determinants and behavioral consequences," Munich Reprints in Economics, University of Munich, Department of Economics 20049, University of Munich, Department of Economics.
  10. Eckel, Catherine C. & Wilson, Rick K., 2004. "Is trust a risky decision?," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 55(4), pages 447-465, December.
  11. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1644-1655, December.
  12. Andersson, Ola & Tyran, Jean-Robert & Wengström, Erik & Holm, Håkan J., 2013. "Risk Aversion Relates to Cognitive Ability: Fact or Fiction?," Working Papers, Lund University, Department of Economics 2013:9, Lund University, Department of Economics, revised 21 Oct 2013.
  13. Lisa R. Anderson & Jennifer M. Mellor, 2008. "Are Risk Preferences Stable? Comparing an Experimental Measure with a Validated Survey-Based Measure," Working Papers, Department of Economics, College of William and Mary 74, Department of Economics, College of William and Mary.
  14. John D. Hey & Andrea Morone & Ulrich Schmidt, 2007. "Noise and Bias in Eliciting Preferences," Kiel Working Papers 1386, Kiel Institute for the World Economy.
  15. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  16. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, Springer, vol. 10(2), pages 171-178, June.
  17. Houser, Daniel & Schunk, Daniel & Winter, Joachim, 2010. "Distinguishing trust from risk: An anatomy of the investment game," Munich Reprints in Economics, University of Munich, Department of Economics 19378, University of Munich, Department of Economics.
  18. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutstr�m, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 897-901, June.
  19. Bohnet, Iris & Zeckhauser, Richard, 2004. "Trust, risk and betrayal," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 55(4), pages 467-484, December.
  20. Isaac, R Mark & James, Duncan, 2000. " Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, Springer, vol. 20(2), pages 177-87, March.
  21. Chetan Dave & Catherine Eckel & Cathleen Johnson & Christian Rojas, 2010. "Eliciting risk preferences: When is simple better?," Journal of Risk and Uncertainty, Springer, Springer, vol. 41(3), pages 219-243, December.
  22. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, Elsevier, vol. 45(1), pages 97-113, October.
  23. Ben-Ner, Avner & Halldorsson, Freyr, 2010. "Trusting and trustworthiness: What are they, how to measure them, and what affects them," Journal of Economic Psychology, Elsevier, Elsevier, vol. 31(1), pages 64-79, February.
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Cited by:
  1. Hardeweg, Bernd & Menkhoff, Lukas & Waibel, Hermann, 2011. "Experimentally-validated survey evidence on individual risk attitudes in rural Thailand," Hannover Economic Papers (HEP), Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät dp-464, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Thomas Buser & Muriel Niederle & Hessel Oosterbeek, 2012. "Gender, Competitiveness and Career Choices," NBER Working Papers 18576, National Bureau of Economic Research, Inc.
  3. Swee-Hoon Chuah & Robert Hoffmann & Jeremy Larner, 2014. "Elicitation effects in a multi-stage bargaining experiment," Experimental Economics, Springer, Springer, vol. 17(2), pages 335-345, June.
  4. Howard, Gregory E. & Roe, Brian E., 2011. "Comparing the Risk Attitudes of U.S. and German Farmers," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 114528, European Association of Agricultural Economists.
  5. Vieider, Ferdinand M. & Lefebvre, Mathieu & Bouchouicha, Ranoua & Chmura, Thorsten & Hakimov, Rustamdjan & Krawczyk, Michal & Martinsson, Peter, 2013. "Common components of risk and uncertainty attitudes across contexts and domains: Evidence from 30 countries," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2013-402, Social Science Research Center Berlin (WZB).
  6. Adam Eric Greenberg, 2013. "When imagining future wealth influences risky decision making," Judgment and Decision Making, Society for Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(3), pages 268-277, May.
  7. Michalis Drouvelis & Daniele Nosenzo, 2012. "Group Identity and Leading-by-Example," Discussion Papers, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham 2012-05, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  8. Garapin, A. & Muller, L. & Rahali, B., 2013. "Does trust mean giving and not risking? Experimental evidence from the trust game," Working Papers, Grenoble Applied Economics Laboratory (GAEL) 2013-12, Grenoble Applied Economics Laboratory (GAEL).
  9. Charness, Gary & Gneezy, Uri & Imas, Alex, 2013. "Experimental methods: Eliciting risk preferences," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 87(C), pages 43-51.
  10. Fabio Galeotti & Daniel John Zizzo, 2012. "Trust and trustworthiness with singleton groups," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS), School of Economics, University of East Anglia, Norwich, UK. 12-03, School of Economics, University of East Anglia, Norwich, UK..
  11. Gloede, Oliver & Menkhoff, Lukas & Waibel, Hermann, 2011. "Risk attitude and risk behavior: Comparing Thailand and Vietnam," Proceedings of the German Development Economics Conference, Berlin 2011 33, Verein für Socialpolitik, Research Committee Development Economics.
  12. Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2013. "Risk aversion relates to cognitive ability: Fact or Fiction?," Discussion Papers 13-10, University of Copenhagen. Department of Economics.
  13. Uwe Dulleck & Jacob Fell & Jonas Fooken, 2011. "Within-subject Intra- and Inter-method consistency of two experimental risk attitude elicitation," NCER Working Paper Series, National Centre for Econometric Research 74, National Centre for Econometric Research.

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