Measuring Risk Attitudes in a Natural Experiment: Data from the Television Game Show LINGO
AbstractWe use data from a television game show, involving elementary lotteries and substantial prize money, as a natural experiment to measure risk attitudes. We find robust evidence of substantial risk aversion. As an extension, we esimate the various models using transformations of the ‘true’ probabilities to decision weights. The estimated degree of risk aversion increases further, while players tend to overestimate substantially their chances of winning. Constant Relative Risk Aversion (CRRA) and Constant Absolute Risk Aversion (CARA) utility specifications perform approximately equally well, with CARA having the advantage that the players’ decisions do not depend on their initial wealth.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1893.
Date of creation: Jun 1998
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Other versions of this item:
- Beetsma, Roel M W J & Schotman, Peter C, 2001. "Measuring Risk Attitudes in a Natural Experiment: Data from the Television Game Show Lingo," Economic Journal, Royal Economic Society, vol. 111(474), pages 821-48, October.
- Beetsma, R.M.W.J. & Schotman, P.C., 1998. "Measuring Risk Attitudes in a Natural Experiment: Data from The Television Game Show LINGO," Papers 98-48, Southern California - School of Business Administration.
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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