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Individual Risk Attitudes: Measurement, Determinants and Behavioral Consequences

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Author Info
Dohmen Thomas
Falk Armin
Huffman David
Sunde Uwe
Schupp Jürgen
Wagner Gert G. (METEOR)

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Abstract

This paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects'' homes. Using a question asking people about their willingness to take risks "in general", we find that gender, age, height, and parental background have an economically significant impact on willingness to take risks. The experiment confirms the behavioral validity of this measure, using paid lottery choices. Turning to other questions about risk attitudes in specific contexts, we find similar results on the determinants of risk attitudes, and also shed light on the deeper question of stability of risk attitudes across contexts. We conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks, occupational choice, and smoking. The question about risk-taking in general generates the best all-around predictor of risky behavior.

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Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 039.

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Date of creation: 2009
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Handle: RePEc:dgr:umamet:2009039

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Keywords: Economics ;

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  5. Burdett, Kenneth & Coles, Melvyn G., 1997. "Steady State Price Distributions in a Noisy Search Equilibrium," Journal of Economic Theory, Elsevier, vol. 72(1), pages 1-32, January. [Downloadable!] (restricted)
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  6. Robert H. Porter & J. Douglas Zona, 1999. "Ohio School Milk Markets: An Analysis of Bidding," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 263-288, Summer. [Downloadable!] (restricted)
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  7. Yoram Halevy, 2007. "Ellsberg Revisited: An Experimental Study," Econometrica, Econometric Society, vol. 75(2), pages 503-536, 03. [Downloadable!] (restricted)
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  8. Joseph Farrell & Carl Shapiro, 1988. "Dynamic Competition with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 123-137, Spring. [Downloadable!] (restricted)
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  9. Herings, P. Jean-Jacques & Peeters, Ronald J. A. P., 2004. "Stationary equilibria in stochastic games: structure, selection, and computation," Journal of Economic Theory, Elsevier, vol. 118(1), pages 32-60, September. [Downloadable!] (restricted)
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  10. Beggs, Alan W & Klemperer, Paul, 1992. "Multi-period Competition with Switching Costs," Econometrica, Econometric Society, vol. 60(3), pages 651-66, May. [Downloadable!] (restricted)
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  11. Maskin, Eric & Tirole, Jean, 2001. "Markov Perfect Equilibrium: I. Observable Actions," Journal of Economic Theory, Elsevier, vol. 100(2), pages 191-219, October. [Downloadable!] (restricted)
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  12. 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. [Downloadable!]
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