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The Binary Lottery Procedure does not induce risk neutrality in the Holt-Laury and Eckel-Grossman tasks

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  • Oechssler, Jörg
  • Sofianos, Andis

Abstract

We test whether the binary lottery procedure makes subjects behave as if they are risk neutral in the Holt-Laury and Eckel-Grossman tasks. Depending on the task we find that at most a third of subjects behave as if risk neutral. In fact, when we compare the distribution of choices we find no significant difference to earlier experiments in the same lab that did not use the binary lottery procedure.

Suggested Citation

  • Oechssler, Jörg & Sofianos, Andis, 2019. "The Binary Lottery Procedure does not induce risk neutrality in the Holt-Laury and Eckel-Grossman tasks," Working Papers 0663, University of Heidelberg, Department of Economics.
    • Handle: RePEc:awi:wpaper:0663
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    2. David Dillenberger & Uzi Segal, 2024. "Allocation Mechanisms with Mixture-Averse Preferences," Boston College Working Papers in Economics 1065, Boston College Department of Economics.
    3. Sofianos, Andis, 2022. "Self-reported & revealed trust: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    risk elicitation; binary lottery procedure; experimental economics;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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