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Risk Aversion and Physical Prowess: Prediction, Choice and Bias

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Author Info
Sheryl Ball
Catherine C. Eckel
Maria Heracleous

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Abstract

This paper reports on experiments where individuals are asked to make risky decisions for themselves as well as predicting the risky decisions of others. Prior research has generally shown that people expect women to be more risk averse than men and that they, in fact are - a result we also find. We ask whether this is a pure gender effect or whether there is more to this result. In particular, both evolutionary and economic theories suggest that physically stronger decision makers should make riskier decisions, suggesting physical prowess as an underlying cause of gender differences. These experiments explore whether risk aversion is associated with a number of measures of real and perceived physical prowess. We find that forecasters consistently predict the types of risky decision produced by both gender and physical prowess, but often at magnitudes that significantly exaggerate than actual differences. Sources of bias are also examined, showing that specific characteristics of the target and predictor lead to over-estimation or under-estimation of risk preferences.

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File URL: ftp://repec.econ.vt.edu/Papers/Ball/Ball-Eckel-Heracleous%207_08.pdf
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Publisher Info
Paper provided by Virginia Polytechnic Institute and State University, Department of Economics in its series Working Papers with number e07-11.

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Length: 35 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:vpi:wpaper:e07-11

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Keywords: Risk Aversion; Physical Risk; Experiment; Gender; Stereotyping;

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  5. V. Kerry Smith & Mary F. Evans & Hyun Kim & Donald H. Taylor, 2004. "Do the Near-Elderly Value Mortality Risks Differently?," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 423-429, 03. [Downloadable!] (restricted)
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  8. Dekel, Eddie & Scotchmer, Suzanne, 1999. "On the Evolution of Attitudes towards Risk in Winner-Take-All Games," Journal of Economic Theory, Elsevier, vol. 87(1), pages 125-143, July. [Downloadable!] (restricted)
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  9. Nicola Persico & Andrew Postlewaite & Dan Silverman, 2004. "The Effect of Adolescent Experience on Labor Market Outcomes: The Case of Height," NBER Working Papers 10522, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Dinky Daruvala, 2007. "Gender, risk and stereotypes," Journal of Risk and Uncertainty, Springer, vol. 35(3), pages 265-283, December. [Downloadable!] (restricted)
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