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Do the Wealthy Risk More Money? An Experimental Comparison

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  • Antoni Bosch-Domènech

    (Universitat Pompeu Fabra)

  • Joaquim Silvestre

    (University of California, Davis)

Abstract

Are poor people more or less likely to take money risks than wealthy folks? We find that risk attraction is more prevalent among the wealthy when the amounts of money at risk are small (not surprising, since ten dollars is a smaller amount for a wealthy person than for a poor one), but, interestingly, for the larger amounts of money at risk the fraction of the nonwealthy displaying risk attraction exceeds that of the wealthy. We also replicate our previous finding that many people display risk attraction for small money amounts, but risk aversion for large ones. We argue that preferences yielding “risk attraction for small money amounts, together with risk aversion for larger amounts, at all levels of wealth,” while contradicting the expected utility hypothesis, may be well-defined, independently of reference points, on the choice space.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 03-15.

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Length: 31 pages
Date of creation: Apr 2003
Date of revision:
Handle: RePEc:kud:kuiedp:0315

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Keywords: risk attraction; risk aversion; wealth; experiments;

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References

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Citations

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Cited by:
  1. Antoni Bosch-Domènech & Joaquim Silvestre, 2006. "Risk aversion and embedding bias," Economics Working Papers 934, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Cardenas, Juan Camilo & Carpenter, Jeffrey P., 2010. "Risk Attitudes and Well-Being in Latin America," IZA Discussion Papers 5279, Institute for the Study of Labor (IZA).
  3. Antoni Bosch-Domènech & Joaquim Silvestre, 2006. "Reflections on gains and losses: A 2 × 2 × 7 experiment," Journal of Risk and Uncertainty, Springer, vol. 33(3), pages 217-235, December.
  4. Antoni Bosch-Domènech & Joaquim Silvestre, 2002. "Reflections on gains and losses: A 2x2x7 experiment," Economics Working Papers 640, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2005.
  5. Antoni Bosch & Joaquim Silvestre, 2003. "Reflections on Gains and Losses: A 2?2? 7 Experiment," Working Papers 4, Barcelona Graduate School of Economics.
  6. Antoni Bosch-Domènech & Joaquim Silvestre, 2012. "Measuring risk aversion with lists: A new bias," Working Papers 1210, University of California, Davis, Department of Economics.
  7. Antoni Bosch-Domènech & Joaquim Silvestre, 2006. "Averting risk in the face of large losses: Bernoulli vs. Tversky and Kahneman," Economics Working Papers 932, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Antoni Bosch-Dom�nech & Joaquim Silvestre, 2012. "Measuring Risk Aversion with Lists: A New Bias," Working Papers 634, Barcelona Graduate School of Economics.
  9. Antoni Bosch-Domènech & Joaquim Silvestre, 2005. "The gain-loss asymmetry and single-self preferences," Economics Working Papers 885, Department of Economics and Business, Universitat Pompeu Fabra.

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