Risk Aversion When Gains Are Likely and Unlikely: Evidence from a Natural Experiment with Large Stakes
AbstractIn the television show Affari Tuoi a contestant is endowed with a sealed box containing a monetary prize between one cent and half a million euros. In the course of the show the contestant learns more information about the distribution of possible monetary prizes inside her box. Consider two groups of contestants, who learned that the chances of their boxes containing a large prize are 20% and 80% correspondingly. Contestants in both groups receive qualitatively similar price offers for selling the content of their boxes. If contestants are less risk averse when facing unlikely gains, the price offer is likely to be more frequently rejected in the first group than in the second group. However, the fraction of rejections is virtually identical across two groups. Thus, contestants appear to have identical risk attitudes over (large) gains of low and high probability.
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Bibliographic InfoPaper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 278.
Date of creation: Mar 2006
Date of revision:
risk attitude; risk aversion; risk seeking; natural experiment;
Find related papers by JEL classification:
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-08 (All new papers)
- NEP-CBE-2006-04-08 (Cognitive & Behavioural Economics)
- NEP-EXP-2006-04-08 (Experimental Economics)
- NEP-FMK-2006-04-08 (Financial Markets)
- NEP-UPT-2006-04-08 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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