Risk tolerance in the present and the future: an experimental study
We design an experiment to study the consistency of risk preferences between lotteries that are resolved and paid in the present versus in the future. The results show that a substantial fraction of subjects (38.6%) exhibits a greater level of risk aversion for lotteries resolved and paid in the present than in the future. Additional treatments suggest that the effect is neither specific to gambles that are realized immediately, nor is due to steep discounting of future payoffs. Our experiment suggests that risk tolerance increases the farther in the future the gamble is realized. Copyright © 2006 John Wiley & Sons, Ltd.
Volume (Year): 27 (2006)
Issue (Month): 6 ()
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- Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2002.
"Estimating Individual Discount Rates in Denmark: A Field Experiment,"
American Economic Review,
American Economic Association, vol. 92(5), pages 1606-1617, December.
- Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2001. "Estimating Individual Discount Rates in Denmark: A Field Experiment," NCEE Working Paper Series 200102, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Nov 2001.
- Glenn Harrison & Morten Lau & Elisabet Rutstrom & Melonie Williams, 2002. "Estimating individual discount rates in denmark: A field experiment," Artefactual Field Experiments 00062, The Field Experiments Website.
- Smith, Vernon L & Walker, James M, 1993. "Rewards, Experience and Decision Costs in First Price Auctions," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 237-245, April.
- Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December. Full references (including those not matched with items on IDEAS)
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