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Eliciting risk attitudes -- how to avoid mean and variance bias in Holt-and-Laury lotteries


  • Norbert Hirschauer
  • Oliver Musshoff
  • Syster C. Maart-Noelck
  • Sven Gruener


This article shows that including inconsistent subjects in a Holt-and-Laury analysis will bias the mean, as well as the variance of the risk attitudes of the subject group of interest to an extent that cannot be determined a priori and that must not be neglected. One might be tempted to simply drop inconsistent subjects from the analysis to avoid such biases in a population-level analysis. Unfortunately, however, this is not a solution: first, the sample size may fall to an unacceptably low level. Second -- and even more important -- simply dropping inconsistent subjects from the analysis may introduce another unknown bias since systematic differences may exist in the risk preferences of those who answer consistently and those who do not. One must thus conclude that, if the group of interest contains a large proportion of inconsistent subjects, the whole set-up of the Holt-and-Laury lottery (HLL) experiment must be critically reconsidered and the experiment eventually repeated.

Suggested Citation

  • Norbert Hirschauer & Oliver Musshoff & Syster C. Maart-Noelck & Sven Gruener, 2014. "Eliciting risk attitudes -- how to avoid mean and variance bias in Holt-and-Laury lotteries," Applied Economics Letters, Taylor & Francis Journals, vol. 21(1), pages 35-38, January.
  • Handle: RePEc:taf:apeclt:v:21:y:2014:i:1:p:35-38
    DOI: 10.1080/13504851.2013.835474

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    References listed on IDEAS

    1. Galarza, Francisco, 2009. "Choices under Risk in Rural Peru," MPRA Paper 17708, University Library of Munich, Germany.
    2. Houser, Daniel & Schunk, Daniel & Winter, Joachim, 2010. "Distinguishing trust from risk: An anatomy of the investment game," Journal of Economic Behavior & Organization, Elsevier, vol. 74(1-2), pages 72-81, May.
    3. Mohammed Abdellaoui & Ahmed Driouchi & Olivier L’Haridon, 2011. "Risk aversion elicitation: reconciling tractability and bias minimization," Theory and Decision, Springer, vol. 71(1), pages 63-80, July.
    4. Kerri Brick & Martine Visser & Justine Burns, 2012. "Risk Aversion: Experimental Evidence from South African Fishing Communities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 133-152.
    5. Charness, Gary & Viceisza, Angelino, 2011. "Comprehension and risk elicitation in the field: Evidence from rural Senegal," IFPRI discussion papers 1135, International Food Policy Research Institute (IFPRI).
    6. Masclet, David & Colombier, Nathalie & Denant-Boemont, Laurent & Lohéac, Youenn, 2009. "Group and individual risk preferences: A lottery-choice experiment with self-employed and salaried workers," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 470-484, June.
    7. repec:feb:artefa:0092 is not listed on IDEAS
    8. Sarah Jacobson & Ragan Petrie, 2009. "Learning from mistakes: What do inconsistent choices over risk tell us?," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 143-158, April.
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    Cited by:

    1. Golo-Friedrich Bauermeister & Oliver Mußhoff, 2019. "Multiple switching behaviour in different display formats of multiple price lists," Applied Economics Letters, Taylor & Francis Journals, vol. 26(1), pages 58-63, January.
    2. Sven Grüner, 2017. "Correlates of Multiple Switching in the Holt and Laury Procedure," Economics Bulletin, AccessEcon, vol. 37(1), pages 297-304.
    3. repec:nms:untern:10.5771/0042-059x-2015-4-396 is not listed on IDEAS
    4. Ihli, Hanna Julia & Chiputwa, Brian & Musshoff, Oliver, 2016. "Do Changing Probabilities or Payoffs in Lottery-Choice Experiments Affect Risk Preference Outcomes? Evidence from Rural Uganda," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(2), May.
    5. repec:eee:soceco:v:73:y:2018:i:c:p:22-33 is not listed on IDEAS
    6. repec:gam:jgames:v:9:y:2018:i:2:p:36-:d:151665 is not listed on IDEAS

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