IDEAS home Printed from https://ideas.repec.org/p/wiw/wus005/4319.html
   My bibliography  Save this paper

How to reveal people's preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods

Author

Listed:
  • Csermely, Tamás
  • Rabas, Alexander

Abstract

The question of how to measure and classify people´s risk preferences is of substantial importance in the field of Economics. Inspired by the multitude of ways used to elicit risk preferences, we conduct a holistic investigation of the most prevalent method, the multiple price list (MPL) and its derivations. In accordance with previous literature, we find that revealed preferences differ under various and even the same versions of the MPL. Thus, an arbitrary selection of a particular risk assessment method can lead to biased results especially if researchers investigate its connection to other phenomena. In order to resolve this issue, we determine the most stable version of the MPL by using multiple measures of within-method consistency, and the version with the highest forecast accuracy by using behavior in two economically relevant games as benchmarks. A derivation of the well-known method by Holt and Laury (2002), where the highest payoff is varied instead of probabilities, emerges as the best MPL method in both dimensions. (authors' abstract)

Suggested Citation

  • Csermely, Tamás & Rabas, Alexander, 2014. "How to reveal people's preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods," Department of Economics Working Paper Series 185, WU Vienna University of Economics and Business.
    • Handle: RePEc:wiw:wus005:4319
    as

    Download full text from publisher

    File URL: https://epub.wu.ac.at/4319/
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter P. Wakker, 2008. "Explaining the characteristics of the power (CRRA) utility family," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1329-1344, December.
    2. von Gaudecker, H.M. & van Soest, A.H.O. & Wengstrom, E., 2008. "Selection and Mode Effects in Risk Preference Elicitation Experiments," Discussion Paper 2008-11, Tilburg University, Center for Economic Research.
    3. Hans-Martin Gaudecker & Arthur Soest & Erik Wengström, 2012. "Experts in experiments," Journal of Risk and Uncertainty, Springer, vol. 45(2), pages 159-190, October.
    4. Walker, James M. & Smith, Vernon L. & Cox, James C., 1987. "Bidding behavior in first price sealed bid auctions : Use of computerized Nash competitors," Economics Letters, Elsevier, vol. 23(3), pages 239-244.
    5. Peter P. Wakker, 2008. "Explaining the characteristics of the power (CRRA) utility family," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1329-1344.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paolo Crosetto & Antonio Filippin, 2016. "A theoretical and experimental appraisal of four risk elicitation methods," Experimental Economics, Springer;Economic Science Association, vol. 19(3), pages 613-641, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tamás Csermely & Alexander Rabas, 2016. "How to reveal people’s preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods," Journal of Risk and Uncertainty, Springer, vol. 53(2), pages 107-136, December.
    2. Tamás Csermely & Alexander Rabas, 2014. "How to reveal people's preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods," Department of Economics Working Papers wuwp185, Vienna University of Economics and Business, Department of Economics.
    3. Adam Booij & Bernard Praag & Gijs Kuilen, 2010. "A parametric analysis of prospect theory’s functionals for the general population," Theory and Decision, Springer, vol. 68(1), pages 115-148, February.
    4. repec:cup:judgdm:v:8:y:2013:i:2:p:116-135 is not listed on IDEAS
    5. Caroline Hillairet & Sarah Kaakai & Mohamed Mrad, 2022. "Time-consistent pension policy with minimum guarantee and sustainability constraint," Papers 2207.01536, arXiv.org, revised Feb 2024.
    6. Jon Anderson & Stephen Burks & Jeffrey Carpenter & Lorenz Götte & Karsten Maurer & Daniele Nosenzo & Ruth Potter & Kim Rocha & Aldo Rustichini, 2013. "Self-selection and variations in the laboratory measurement of other-regarding preferences across subject pools: evidence from one college student and two adult samples," Experimental Economics, Springer;Economic Science Association, vol. 16(2), pages 170-189, June.
    7. Tesselaar, Max & Botzen, W.J. Wouter & Robinson, Peter J. & Aerts, Jeroen C.J.H. & Zhou, Fujin, 2022. "Charity hazard and the flood insurance protection gap: An EU scale assessment under climate change," Ecological Economics, Elsevier, vol. 193(C).
    8. Syngjoo Choi & Jeongbin Kim & Eungik Lee & Jungmin Lee, 2022. "Probability Weighting and Cognitive Ability," Management Science, INFORMS, vol. 68(7), pages 5201-5215, July.
    9. Attema, Arthur E. & Brouwer, Werner B.F. & l’Haridon, Olivier & Pinto, Jose Luis, 2016. "An elicitation of utility for quality of life under prospect theory," Journal of Health Economics, Elsevier, vol. 48(C), pages 121-134.
    10. Arthur E. Attema & Marieke Krol & Job Exel & Werner B. F. Brouwer, 2018. "New findings from the time trade-off for income approach to elicit willingness to pay for a quality adjusted life year," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(2), pages 277-291, March.
    11. de Castro, Luciano & Galvao, Antonio F. & Noussair, Charles N. & Qiao, Liang, 2022. "Do people maximize quantiles?," Games and Economic Behavior, Elsevier, vol. 132(C), pages 22-40.
    12. Teresa Backhaus, 2022. "Training in Late Careers - A Structural Approach," CRC TR 224 Discussion Paper Series crctr224_2022_382, University of Bonn and University of Mannheim, Germany.
    13. Muris, C.H.M., 2011. "Panel data econometrics and climate change," Other publications TiSEM 019be37c-ed20-4483-bebd-6, Tilburg University, School of Economics and Management.
    14. J.M.J. Delnoij & K.J.M. De Jaegher, 2016. "Competing first-price and second-price auctions," Working Papers 16-07, Utrecht School of Economics.
    15. Booth, Alison & Cardona-Sosa, Lina & Nolen, Patrick, 2014. "Gender differences in risk aversion: Do single-sex environments affect their development?," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 126-154.
    16. Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2016. "Risk Aversion Relates to Cognitive Ability: Preferences Or Noise?," Journal of the European Economic Association, European Economic Association, vol. 14(5), pages 1129-1154.
    17. Galama, T. & Hullegie, P. & Meijer, E. & Outcault, S., 2012. "Empirical evidence for decreasing returns to scale in a health capital model," Health, Econometrics and Data Group (HEDG) Working Papers 12/05, HEDG, c/o Department of Economics, University of York.
    18. Tyran, Jean-Robert & Andersson, Ola & Holm, Håkan J. & Wengström, Erik, 2013. "Risking Other People?s Money," CEPR Discussion Papers 9743, C.E.P.R. Discussion Papers.
    19. John Grable & Eun Jin Kwak & Martha Fulk & Aditi Routh, 2022. "A Simplified Measure of Investor Risk Aversion," Journal of Interdisciplinary Economics, , vol. 34(1), pages 7-34, January.
    20. Max Tesselaar & W. J. Wouter Botzen & Timothy Tiggeloven & Jeroen C. J. H. Aerts, 2023. "Flood insurance is a driver of population growth in European floodplains," Nature Communications, Nature, vol. 14(1), pages 1-14, December.
    21. Holzmeister, Felix & Stefan, Matthias, 2019. "The Risk Elicitation Puzzle Revisited: Across-Methods (In)consistency?," OSF Preprints pj9u2, Center for Open Science.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wus005:4319. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WU Library (email available below). General contact details of provider: https://research.wu.ac.at/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.