Are Risk Preferences Stable? Comparing an Experimental Measure with a Validated Survey-Based Measure
AbstractWe 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, College of William and Mary in its series Working Papers with number 74.
Length: 43 pages
Date of creation: 12 Aug 2008
Date of revision:
Risk Preferences; Laboratory Experiment; Survey;
Other versions of this item:
- Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-05 (All new papers)
- NEP-CBE-2008-09-05 (Cognitive & Behavioural Economics)
- NEP-EXP-2008-09-05 (Experimental Economics)
- NEP-UPT-2008-09-05 (Utility Models & Prospect Theory)
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.:
- 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.
- Gaudecker, Hans-Martin von & van Soest, Arthur & Wengström, Erik, 2008.
"Selection and Mode Effects in Risk Preference Elicitation Experiments,"
IZA Discussion Papers
3321, Institute for the Study of Labor (IZA).
- Gaudecker, H.M. von & Soest, A.H.O. van & Wengstrom, E., 2008. "Selection and Mode Effects in Risk Preference Elicitation Experiments," Discussion Paper 2008-11, Tilburg University, Center for Economic Research.
- von Gaudecker, Martin & van Soest, Arthur & Wengström, Erik, 2008. "Selection and Mode Effects in Risk Preference Elicitation Experiments," Sonderforschungsbereich 504 Publications 08-46, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Juergen Schupp & Gert Wagner, 2005.
"Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey,"
2096, The Field Experiments Website.
- Dohmen, Thomas & Falk, Armin & Huffman, David B. & Sunde, Uwe & Schupp, Jürgen & Wagner, Gert G., 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," IZA Discussion Papers 1730, Institute for the Study of Labor (IZA).
- Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jurgen Schupp & Gert Wagner, 2005. "Individual risk attitudes: New evidence from a large, representative, experimentally-validated survey," Framed Field Experiments 00140, The Field Experiments Website.
- Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," Discussion Papers of DIW Berlin 511, DIW Berlin, German Institute for Economic Research.
- Dohmen, Thomas J & Falk, Armin & Huffman, David & Schupp, Jürgen & Sunde, Uwe & Wagner, Gert Georg, 2006. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," CEPR Discussion Papers 5517, C.E.P.R. Discussion Papers.
- Kajal Lahiri & Jae G. Song, 2000. "The effect of smoking on health using a sequential self-selection model," Health Economics, John Wiley & Sons, Ltd., vol. 9(6), pages 491-511.
- Kerwin Kofi Charles & Erik Hurst, 2002.
"The Correlation of Welath Across Generations,"
NBER Working Papers
9314, National Bureau of Economic Research, Inc.
- Isaac, R Mark & James, Duncan, 2000. " Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-87, March.
- Glenn Harrison & John List & Charles Towe, 2004.
"Naturally occurring preferences and exogenous laboratory experiments: A case study of risk aversion,"
Framed Field Experiments
00155, The Field Experiments Website.
- Glenn W Harrison & John A List & Charles Towe, 2007. "Naturally Occurring Preferences and Exogenous Laboratory Experiments: A Case Study of Risk Aversion," Econometrica, Econometric Society, vol. 75(2), pages 433-458, 03.
- Kan, Kamhon, 2003. "Residential mobility and job changes under uncertainty," Journal of Urban Economics, Elsevier, vol. 54(3), pages 566-586, November.
- Steffen Andersen & Glenn Harrison & Morten Lau & E. Rutström, 2009.
"Elicitation using multiple price list formats,"
Springer, vol. 12(3), pages 365-366, September.
- Rosen, H.S.Harvey S. & Wu, Stephen, 2004.
"Portfolio choice and health status,"
Journal of Financial Economics,
Elsevier, vol. 72(3), pages 457-484, June.
- Kruse, Jamie Brown & Thompson, Mark A., 2003. "Valuing low probability risk: survey and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 50(4), pages 495-505, April.
- Eckel, Catherine C. & Grossman, Philip J., 2008.
"Men, Women and Risk Aversion: Experimental Evidence,"
Handbook of Experimental Economics Results,
- Anderson, Lisa R. & Mellor, Jennifer M., 2008.
"Predicting health behaviors with an experimental measure of risk preference,"
Journal of Health Economics,
Elsevier, vol. 27(5), pages 1260-1274, September.
- Lisa R. Anderson & Jennifer M. Mellor, 2007. "Predicting Health Behaviors with an Experimental Measure of Risk Preference," Working Papers 59, Department of Economics, College of William and Mary.
- 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.
- Julie R. Agnew & Lisa R. Anderson & Jeffrey R. Gerlach & Lisa R. Szykman, 2008. "Who Chooses Annuities? An Experimental Investigation of the Role of Gender, Framing, and Defaults," American Economic Review, American Economic Association, vol. 98(2), pages 418-22, May.
- repec:feb:framed:0074 is not listed on IDEAS
- Camerer, Colin F & Hogarth, Robin M, 1999.
"The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework,"
Journal of Risk and Uncertainty,
Springer, vol. 19(1-3), pages 7-42, December.
- Camerer, Colin F. & Hogarth, Robin M., 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Working Papers 1059, California Institute of Technology, Division of the Humanities and Social Sciences.
- Sarah Brown & Karl Taylor, 2006. "Education, Risk Preference and Wages," Working Papers 2006002, The University of Sheffield, Department of Economics, revised Feb 2006.
- Kimball, Miles S & Sahm, Claudia R & Shapiro, Matthew D, 2008.
"Imputing Risk Tolerance From Survey Responses,"
Journal of the American Statistical Association,
American Statistical Association, vol. 103(483), pages 1028-1038.
- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
- 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.
- John D Hey & Andrea Morone & Ulrich Schmidt, 2007. "Noise and Bias in Eliciting Preferences," Discussion Papers 07/04, Department of Economics, University of York.
- John D. Hey & Andrea Morone & Ulrich Schmidt, 2007. "Noise and Bias in Eliciting Preferences," Kiel Working Papers 1386, Kiel Institute for the World Economy.
- Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Lost In State Space: Are Preferences Stable?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 1091-1112, 08.
- Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
- Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutström, 2005. "Temporal stability of estimates of risk aversion," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(1), pages 31-35, January.
- Gabriel Picone & Frank Sloan & Donald Taylor, 2004. "Effects of Risk and Time Preference and Expected Longevity on Demand for Medical Tests," Journal of Risk and Uncertainty, Springer, vol. 28(1), pages 39-53, January.
- Lusardi, Annamaria, 1998. "On the Importance of the Precautionary Saving Motive," American Economic Review, American Economic Association, vol. 88(2), pages 449-53, May.
- Duncan James, 2007. "Stability of risk preference parameter estimates within the Becker-DeGroot-Marschak procedure," Experimental Economics, Springer, vol. 10(2), pages 123-141, June.
- Chetan Dave & Catherine Eckel & Cathleen Johnson & Christian Rojas, 2010. "Eliciting risk preferences: When is simple better?," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 219-243, December.
- Lucie Schmidt, 2008.
"Risk preferences and the timing of marriage and childbearing,"
Springer, vol. 45(2), pages 439-460, May.
- Lucie Schmidt, 2007. "Risk Preferences and the Timing of Marriage and Childbearing," Department of Economics Working Papers 2007-03, Department of Economics, Williams College.
- Catherine C. Eckel & Philip J. Grossman, 2002. "Sex Differences and Statistical Stereotyping in Attitudes Toward Financial Risk," Development Research Unit Working Paper Series archive-03, Monash University, Department of Economics.
- Jungmin Lee & Cary Deck & Javier Reyes & Chris Rosen, 2008. "Measuring Risk Attitudes Controlling for Personality Traits," Working Papers 0801, Florida International University, Department of Economics.
- Norton, Edward C., 2000. "Long-term care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 17, pages 955-994 Elsevier.
- Jayson L. Lusk & Keith H. Coble, 2005. "Risk Perceptions, Risk Preference, and Acceptance of Risky Food," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 393-405.
- Dhaval Dave & Henry Saffer, 2007. "Risk Tolerance and Alcohol Demand Among Adults and Older Adults," NBER Working Papers 13482, National Bureau of Economic Research, Inc.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daifeng He) or (Alfredo Pereira).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.