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The "Bomb" Risk Elicitation Task

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  • Paolo Crosetto
  • Antonio Filippin

Abstract

This paper presents the Bomb Risk Elicitation Task (BRET), an intuitive procedure aimed at measuring risk attitudes. Subjects decide how many boxes to collect out of 100, one of which containing a bomb. Earnings increase linearly with the number of boxes accumulated but are zero if the bomb is also collected. The BRET requires minimal numeracy skills, avoids truncation of the data, allows to precisely estimate both risk aversion and risk seeking, and is not affected by the degree of loss aversion or by violations of the Reduction Axiom. We validate the BRET and test its robustness in a large-scale experiment, although the task can be performed in the field as well. Choices react significantly to the stakes and to the size of the choice set. Our experiment rationalizes the gender gap that often characterizes choices under uncertainty by means of a higher loss rather than risk aversion.

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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 517.

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Length: 29 p.
Date of creation: 2012
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp517

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Keywords: Risk Aversion; Loss Aversion; Elicitation Method;

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References

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Citations

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Cited by:
  1. Antonio FILIPPIN & Paolo CROSETTO, 2014. "A Reconsideration of Gender Differences in Risk Attitudes," Departmental Working Papers, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano 2014-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  2. Charness, Gary & Gneezy, Uri & Imas, Alex, 2013. "Experimental methods: Eliciting risk preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 43-51.
  3. Guillen, Pablo & Hakimov, Rustamdjan, 2014. "Monkey see, monkey do: Truth-telling in matching algorithms and the manipulation of others," Discussion Papers, Research Unit: Market Behavior SP II 2014-202, Social Science Research Center Berlin (WZB).
  4. Paolo Crosetto & Antonio Filippin, 2013. "A Theoretical and Experimental Appraisal of Five Risk Elicitation Methods," SOEPpapers on Multidisciplinary Panel Data Research 547, DIW Berlin, The German Socio-Economic Panel (SOEP).
  5. Stefan Palan, 2014. "A Software for Asset Market Experiments," Working Paper Series, Social and Economic Sciences 2014-01, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.

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