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Measuring individual risk attitudes in the lab: Task or ask? An empirical comparison

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  • Lönnqvist, Jan-Erik
  • Verkasalo, Markku
  • Walkowitz, Gari
  • Wichardt, Philipp C.

Abstract

This paper reports on an empirical comparison of two prominent measures of individual risk attitudes – the Holt and Laury (2002) lottery-choice task and the multi-item questionnaire advocated by Dohmen et al. (2011) – with respect to their within-subject stability over time (one year) and their correlation with actual risk-taking behavior in the lab – here the amount sent in a trust game (Berg et al., 1995). Our results suggest that the two risk attitude measures are at best only weakly correlated. Only the questionnaire measure shows high test–retest stability, while virtually no such stability is found in the lottery-choice task. In addition, only the questionnaire measure shows the expected correlations with a Big Five personality measure and is correlated with actual risk-taking behavior. With respect to behavior in the trust game, we find a high retest stability of transfers. This supports the conjecture that trusting behavior has a component which itself is a stable individual characteristic.

Suggested Citation

  • Lönnqvist, Jan-Erik & Verkasalo, Markku & Walkowitz, Gari & Wichardt, Philipp C., 2015. "Measuring individual risk attitudes in the lab: Task or ask? An empirical comparison," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 254-266.
    • Handle: RePEc:eee:jeborg:v:119:y:2015:i:c:p:254-266
    DOI: 10.1016/j.jebo.2015.08.003
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    Keywords

    Risk attitudes; Trust; Personality; Lab experiments;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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