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Measuring individual risk-attitudes: an experimental comparison between Holt & Laury measure and an insurance-choices-based procedure

Author

Listed:
  • Anne Corcos

    (CURAPP-ESS UMR 7319; CNRS; Université de Picardie)

  • François Pannequin

    (CREST; ENS Paris-Saclay; Université Paris-Saclay)

  • Claude Montmarquette,

    (CIRANO; Université de Montréal)

Abstract

This paper compares the Holt and Laury’s risk attitude elicitation with a risk attitude classification associated with insurance behavior. The standard Holt and Laury’s procedure (2002) is implemented in the loss domain, while the second tool is based on contextualized experimental hedging choices for insurance and loss reduction (secondary prevention). Our findings highlight the high consistency between the two procedures for more than two-thirds of the subjects, both measures leading to the same risk-attitude assignment. Interestingly, cases where the two measures do not coincide concern the only subjects whose Holt and Laury’s risk aversion coefficient is borderline. For these participants, using both measures allows for a more accurate assessment. Finally, the HL-irrational behavior of participants uncovers specific risk-averse behavior signature, while contextualized-irrational behavior reveals a risk-loving behavior.

Suggested Citation

  • Anne Corcos & François Pannequin & Claude Montmarquette,, 2017. "Measuring individual risk-attitudes: an experimental comparison between Holt & Laury measure and an insurance-choices-based procedure," Working Papers 2017-79, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2017-79
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    risk-attitude classification; insurance demand; self-insurance demand; loss reduction; secondary prevention; multiple price list method; experimental study;
    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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