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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. Paolo Crosetto & Antonio Filippin, 2013. "A Theoretical and Experimental Appraisal of Five Risk Elicitation Methods," Jena Economic Research Papers 2013-009, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Guillén, Pablo & Hakimov, Rustamdjan, 2014. "Monkey see, monkey do: truth-telling in matching algorithms and the manipulation of others," Working Papers 2014-01, University of Sydney, School of Economics.
  3. Filippin, A. & Crosetto, P., 2014. "A reconsideration of gender differences in risk attitudes," Working Papers 2014-01, Grenoble Applied Economics Laboratory (GAEL).
  4. Charness, Gary & Gneezy, Uri & Imas, Alex, 2013. "Experimental methods: Eliciting risk preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 43-51.

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