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Revisiting risk aversion: Can risk preferences change with experience?

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  • Ert, Eyal
  • Haruvy, Ernan

Abstract

The Holt–Laury measure for risk aversion has been used extensively in economic studies to measure individuals’ risk aversion. The idea behind this measure is that individuals have stable risk preferences when making decisions under risk. We show that having repeated experiences with the Holt–Laury task can move individuals from exhibiting “risk aversion” to displaying “risk neutrality.” This finding suggests that either risk preferences are not robust to a few experiences or that responses to the tasks indicate something else. We show that a simple model of adaptation can capture this behavioral pattern.

Suggested Citation

  • Ert, Eyal & Haruvy, Ernan, 2017. "Revisiting risk aversion: Can risk preferences change with experience?," Economics Letters, Elsevier, vol. 151(C), pages 91-95.
    • Handle: RePEc:eee:ecolet:v:151:y:2017:i:c:p:91-95
    DOI: 10.1016/j.econlet.2016.12.008
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    References listed on IDEAS

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    8. Ilke Aydogan & Yu Gao, 2020. "Experience and rationality under risk: re-examining the impact of sampling experience," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1100-1128, December.
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    10. repec:cup:judgdm:v:17:y:2022:i:5:p:1094-1122 is not listed on IDEAS
    11. Funke, Katja & Hirschauer, Norbert & Peth, Denise & Mußhoff, Oliver & Becker, Oliver Arránz, 2019. "Can personality traits explain compliance behaviour? - A study of compliance with water-protection rules in German agriculture," SocArXiv jnexr, Center for Open Science.

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