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Measuring Risk Attitudes in a Natural Experiment: Data from the Television Game Show LINGO

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  • Beetsma, Roel
  • Schotman, Peter C

Abstract

We 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 Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1893.

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Date of creation: Jun 1998
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Handle: RePEc:cpr:ceprdp:1893

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Related research

Keywords: decision weights; expected utility; LINGO; natural experiments; Risk Aversion;

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