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Small-scale changes in wealth and attitudes toward risk

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  • Sergio Sousa

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    (University of Nottingham)

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    Abstract

    This paper reports on an experiment designed to examine the effects of small-scale changes in wealth on risk attitudes. We find that the money given prior to risky choices does not induce a change of subjects' risk preferences. This result supports a key assumption in a recent literature over calibration critique of decision theories. Furthermore, as the money given to subjects in our experiment is administered in between risky tasks and framed as a reward rather than a windfall gain, our result suggests that experimental findings reporting that a prior monetary gain induces individuals to take more risks (house-money effect) may be more sensitive to prior experience with the risk-elicitation task or framing of the money than previously thought.

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    File URL: http://www.nottingham.ac.uk/cedex/documents/papers/2010-11.pdf
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    Bibliographic Info

    Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2010-11.

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    Date of creation: Jun 2010
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    Handle: RePEc:not:notcdx:2010-11

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    Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
    Phone: (44) 0115 951 5620
    Fax: (0115) 951 4159
    Web page: http://www.nottingham.ac.uk/economics/cedex/
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    Related research

    Keywords: risk aversion; wealth effects; risk-elicitation; house-money effect; narrow framing;

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    Cited by:
    1. Urban Sila & Ricardo Sousa, 2014. "Windfall gains and labour supply: evidence from the European household panel," IZA Journal of Labor Economics, Springer, vol. 3(1), pages 1-27, December.

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