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Risk attitude in real decision proBLEMs

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Author Info
Fabrizio Botti () (LUISS Guido Carli)
Anna Conte () (University of Rome II “Tor Vergata”, University of Rome I “La Sapienza”, and LUISS Guido Carli)
Daniela T. Di Cagno () (LUISS Guido Carli)
Carlo D'Ippoliti () (University of Rome I “La Sapienza”, and LUISS Guido Carli)

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Abstract

Experimental economics focuses on eliciting preferences, studying individuals one at a time to take into account their heterogeneity. Experiments have the appealing property of collecting enough observations to perform such an analysis. In real word, and in natural experiments, individuals cannot be observed according to experimenters’ needs. We propose a method that aggregates over individuals taking into account their heterogeneity. Using data from a natural experiment, we estimate three models of decision making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. Our results show that individual-wise analyses can be substituted by pooled approaches without losing information about individual heterogeneity.

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Publisher Info
Paper provided by Department of Economic and Business Sciences, LUISS Guido Carli in its series Quaderni DPTEA with number 144.

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Handle: RePEc:lui:wpaper:144

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Related research
Keywords: Panel Data Unobserved heterogeneity Choice under risk

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Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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    Other versions:
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    Other versions:
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