Measuring Risk Aversion with Lists: A New Bias
Various experimental procedures aimed at measuring individual risk aversion involve a list of pairs of alternative prospects. We first study the widely used method by Holt and Laury (2002), for which we find that the removal of some items from the lists yields a systematic decrease in risk aversion. This bias is quite distinct from other confounds that have been previously observed in the use of the Holt and Laury method. It may be related to empirical phenomena and theoretical developments where better prospects increase risk aversion. Nevertheless, we have also found that the more recent elicitation method due to Abdellaoui et al. (2011), also based on lists, does not display any statistically significant bias when the corresponding items of the list are removed. Our results suggest that methods other than the popular Holt and Laury one may be preferable for the measurement of risk aversion.
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"Does risk aversion or attraction depend on income? An experiment,"
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"Averting risk in the face of large losses: Bernoulli vs. Tversky and Kahneman,"
Elsevier, vol. 107(2), pages 180-182, May.
- Antoni Bosch-Domènech & Joaquim Silvestre, 2006. "Averting risk in the face of large losses: Bernoulli vs. Tversky and Kahneman," Economics Working Papers 932, Department of Economics and Business, Universitat Pompeu Fabra.
- Steffen Andersen & Glenn Harrison & Morten Lau & E. RutstrÃ¶m, 2006.
"Elicitation using multiple price list formats,"
Springer, vol. 9(4), pages 383-405, December.
- Antoni Bosch-Domènech & Joaquim Silvestre, 2003.
"Do the eealthy risk more money? An experimental comparison,"
Economics Working Papers
692, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2005.
- Antoni Bosch-Domènech & Joaquim Silvestre, 2003. "Do the Wealthy Risk More Money? An Experimental Comparison," Discussion Papers 03-15, University of Copenhagen. Department of Economics.
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- Louis Lévy-Garboua & Hela Maafi & David Masclet & Antoine Terracol, 2012. "Risk aversion and framing effects," Experimental Economics, Springer, vol. 15(1), pages 128-144, March.
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