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How General Are Risk Preferences? Choices under Uncertainty in Different Domains

  • Liran Einav
  • Amy Finkelstein
  • Iuliana Pascu
  • Mark R. Cullen

We analyze the extent to which individuals' choices over five employer-provided insurance coverage decisions and one 401(k) investment decision exhibit systematic patterns, as would be implied by a general utility component of risk preferences. We provide evidence consistent with an important domain-general component that operates across all insurance choices. We find a considerably weaker relationship between one's insurance decisions and 401(k) asset allocation, although this relationship appears larger for more "financially sophisticated" individuals. Estimates from a stylized coverage choice model suggest that up to 30 percent of our sample makes choices that may be consistent across all 6 domains. (JEL D12, D14, D81, G22, J33)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 6 (October)
Pages: 2606-38

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:6:p:2606-38
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