Heterogeneity in Risky Choice Behaviour in a Broad Population
AbstractWe analyse risk preferences using an experiment with real incentives in a representative sample of 1,422 Dutch respondents. Our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics: Utility curvature, loss aversion, preferences towards the timing of uncertainty resolution, and the propensity to choose randomly rather than on the basis of preferences. We find that all four parameters contribute to explaining choice behaviour. The structural parameters are significantly associated with socio-economic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4022.
Length: 39 pages
Date of creation: Feb 2009
Date of revision:
Publication status: published in: American Economic Review, 2011, 101 (2), 664-694
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Other versions of this item:
- Hans-Martin von Gaudecker & Arthur van Soest & Erik Wengstrom, 2011. "Heterogeneity in Risky Choice Behavior in a Broad Population," American Economic Review, American Economic Association, vol. 101(2), pages 664-94, April.
- Gaudecker, H.M. von & Soest, A.H.O. van & Wengstrom, E., 2009. "Heterogeneity in Risky Choice Behavior in a Broad Population," Discussion Paper 2009-12, Tilburg University, Center for Economic Research.
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-28 (All new papers)
- NEP-CBE-2009-02-28 (Cognitive & Behavioural Economics)
- NEP-EXP-2009-02-28 (Experimental Economics)
- NEP-UPT-2009-02-28 (Utility Models & Prospect Theory)
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