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Are Risk Preferences Stable? Comparing an Experimental Measure with a Validated Survey-Based Measure

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Author Info
Lisa R. Anderson () (Department of Economics, College of William and Mary)
Jennifer M. Mellor () (Department of Economics, College of William and Mary)

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Abstract

We examine the stability of risk preference within subjects by comparing measures obtained from two elicitation methods, an economics experiment with real monetary rewards and a survey with questions on hypothetical gambles. The survey questions have been validated by numerous empirical studies of investment, insurance demand, smoking and alcohol use, and recent studies have shown the experimental measure is associated with several real-world risky behaviors. For the majority of subjects, we find that risk preferences are not stable across elicitation methods. In interval regression models, subjects’ risk preference classifications from survey questions on job-based gambles are not associated with risk preference estimates from the experiment. However, we find that risk classifications from inheritance-based gambles are significantly associated with the experimental measure. We identify some subjects for whom risk preference estimates are more strongly correlated across elicitation methods, suggesting that unobserved subject traits like comprehension or effort influence risk preference stability.

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Publisher Info
Paper provided by Department of Economics, College of William and Mary in its series Working Papers with number 74.

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Length: 43 pages
Date of creation: 12 Aug 2008
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Handle: RePEc:cwm:wpaper:74

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Related research
Keywords: Risk Preferences; Laboratory Experiment; Survey;

Find related papers by JEL classification:
C9 - Mathematical and Quantitative Methods - - Design of Experiments
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  3. Kan, Kamhon, 2003. "Residential mobility and job changes under uncertainty," Journal of Urban Economics, Elsevier, vol. 54(3), pages 566-586, November. [Downloadable!] (restricted)
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    Other versions:
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    Other versions:
  14. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
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    Other versions:
  18. Lucie Schmidt, 2007. "Risk Preferences and the Timing of Marriage and Childbearing," Department of Economics Working Papers 2007-3, Department of Economics, Williams College. [Downloadable!]
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    Other versions:
  21. Sloan, Frank A & Norton, Edward C, 1997. "Adverse Selection, Bequests, Crowding Out, and Private Demand for Insurance: Evidence from the Long-Term Care Insurance Market," Journal of Risk and Uncertainty, Springer, vol. 15(3), pages 201-19, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. John Hey & Andrea Morone & Ulrich Schmidt, 2009. "Noise and bias in eliciting preferences," Journal of Risk and Uncertainty, Springer, vol. 39(3), pages 213-235, December. [Downloadable!] (restricted)
    Other versions:
  2. Morone, Andrea, 2009. "On Price Data Elicitation: a Laboratory Investigation," MPRA Paper 18358, University Library of Munich, Germany. [Downloadable!]
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