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Do the Wealthy Risk More Money? An Experimental Comparison

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  • Antoni Bosch
  • Joaquim Silvestre

Abstract

Are poor people more or less likely to take money risks than wealthy folks? We find that risk attraction is more prevalent among the wealthy when the amounts of money at risk are small (not surprising, since ten dollars is a smaller amount for a wealthy person than for a poor one), but, interestingly, for the larger amounts of money at risk the fraction of the nonwealthy displaying risk attraction exceeds that of the wealthy. We also replicate our previous finding that many people display risk attraction for small money amounts, but risk aversion for large ones. We argue that preferences yielding risk attraction for small money amounts, together with risk aversion for larger amounts, at all levels of wealth, while contradicting the expected utility hypothesis, may be well-defined, independently of reference points, on the choice space.

Suggested Citation

  • Antoni Bosch & Joaquim Silvestre, 2003. "Do the Wealthy Risk More Money? An Experimental Comparison," Working Papers 10, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:10
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    Citations

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    Cited by:

    1. Antoni Bosch-Domènech & Joaquim Silvestre, 2013. "Measuring risk aversion with lists: a new bias," Theory and Decision, Springer, vol. 75(4), pages 465-496, October.
    2. Juan Camilo Cárdenas & Jeffrey Carpenter, 2010. "Risk Attitudes and Well-being in Latin America," DOCUMENTOS CEDE 007718, UNIVERSIDAD DE LOS ANDES-CEDE.
    3. Antoni Bosch-Domènech & Joaquim Silvestre, 2005. "The gain-loss asymmetry and single-self preferences," Economics Working Papers 885, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Antoni Bosch-Domènech & Joaquim Silvestre, 2002. "Reflections on gains and losses: A 2x2x7 experiment," Economics Working Papers 640, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2005.
    5. Bosch-Domènech, Antoni & Silvestre, Joaquim, 2010. "Averting risk in the face of large losses: Bernoulli vs. Tversky and Kahneman," Economics Letters, Elsevier, vol. 107(2), pages 180-182, May.
    6. Antoni Bosch-Domènech & Joaquim Silvestre, 2006. "Risk aversion and embedding bias," Economics Working Papers 934, Department of Economics and Business, Universitat Pompeu Fabra.
    7. Saziye Gazioğlu & Nilifer Calıskan, 2011. "Cumulative prospect theory challenges traditional expected utility theory," Applied Financial Economics, Taylor & Francis Journals, vol. 21(21), pages 1581-1586.
    8. Sergio Sousa, 2010. "Small-scale changes in wealth and attitudes toward risk," Discussion Papers 2010-11, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    9. Antoni Bosch-Domènech & Joaquim Silvestre, 2006. "Reflections on gains and losses: A 2 × 2 × 7 experiment," Journal of Risk and Uncertainty, Springer, vol. 33(3), pages 217-235, December.

    More about this item

    Keywords

    Risk Attraction; Risk Aversion; Wealth; experiments;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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