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Measuring Individual Risk Attitudes in the Lab: Task or Ask? An Empirical Comparison

  • Jan-Erik Loennqvist

    (Faculty of Behavioural Sciences, University of Helsinki, Finland)

  • Markku Verkasalo

    (Faculty of Behavioural Sciences, University of Helsinki, Finland)

  • Gari Walkowitz

    (Department of Management, University of Cologne, Germany)

  • Philipp C. Wichardt

    (Institute of Economic Theory 3, University of Bonn, Germany)

This paper compares two prominent empirical measures of individual risk attitudes - the Holt and Laury (2002) lottery-choice task and the multi-item questionnaire advocated by Dohmen, Falk, Huffman, Schupp, Sunde and Wagner (forthcoming) - with respect to (a) their within-subject stability over time (one year) and (b) their correlation with actual risk-taking behaviour in the lab - here the amount sent in a trust game (Berg, Dickaut, McCabe, 1995). As it turns out, the measures themselves are uncorrelated (both times) and, most importantly, only the questionnaire measure exhibits test-re-test stability (rho = .78), while virtually no such stability is found in the lottery-choice task. In addition, only the questionnaire measure shows the expected correlations with a Big Five personality measure and is correlated with actual risk-taking behaviour. The results suggest that the questionnaire measure is a better measure of individual risk attitudes than the lottery-choice task. Moreover, with respect to trust, the high re-test stability of trust transfers (rho = .70) further supports the conjecture that trusting behaviour indeed has a component which itself is a stable individual characteristic (Glaeser, Laibson, Scheinkman and Soutter, 2000).

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Paper provided by Cologne Graduate School in Management, Economics and Social Sciences in its series Cologne Graduate School Working Paper Series with number 02-03.

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Date of creation: 18 Feb 2011
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Handle: RePEc:cgr:cgsser:02-03
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  1. 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.
  2. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2012. "The intergenerational transmission of risk and trust attitudes," Munich Reprints in Economics 20051, University of Munich, Department of Economics.
  3. Fehr, Ernst, 2008. "On the Economics and Biology of Trust," IZA Discussion Papers 3895, Institute for the Study of Labor (IZA).
  4. Dohmen Thomas & Falk Armin & Huffman David & Sunde Uwe & Schupp Jürgen & Wagner Gert, 2009. "Individual Risk Attitudes: Measurement, Determinants and Behavioral Consequences," ROA Research Memorandum 007, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  5. Dohmen, Thomas & Falk, Armin & Huffman, David B. & Sunde, Uwe, 2007. "Are Risk Aversion and Impatience Related to Cognitive Ability?," IZA Discussion Papers 2735, Institute for the Study of Labor (IZA).
  6. Rabin, Matthew, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Department of Economics, Working Paper Series qt731230f8, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  7. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutström, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, vol. 95(3), pages 897-901, June.
  8. Chetan Dave & Catherine Eckel & Cathleen Johnson & Christian Rojas, 2010. "Eliciting risk preferences: When is simple better?," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 219-243, December.
  9. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Lost In State Space: Are Preferences Stable?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 1091-1112, 08.
  10. Charles A. Holt & Susan K. Laury, 2005. "Risk Aversion and Incentive Effects: New Data without Order Effects," American Economic Review, American Economic Association, vol. 95(3), pages 902-912, June.
  11. John D Hey & Andrea Morone & Ulrich Schmidt, 2007. "Noise and Bias in Eliciting Preferences," Discussion Papers 07/04, Department of Economics, University of York.
  12. Bohnet, Iris & Zeckhauser, Richard, 2003. "Trust, Risk and Betrayal," Working Paper Series rwp03-041, Harvard University, John F. Kennedy School of Government.
  13. Jacob K. Goeree & Charles A. Holt & Thomas R. Palfrey, 2000. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Virginia Economics Online Papers 345, University of Virginia, Department of Economics.
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  15. Eckel, Catherine C. & Wilson, Rick K., 2004. "Is trust a risky decision?," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 447-465, December.
  16. Ben-Ner, Avner & Halldorsson, Freyr, 2010. "Trusting and trustworthiness: What are they, how to measure them, and what affects them," Journal of Economic Psychology, Elsevier, vol. 31(1), pages 64-79, February.
  17. Dohmen, Thomas & Falk, Armin, 2011. "Performance Pay and Multidimensional Sorting - Productivity, Preferences and Gender," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 360, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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  19. Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.
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  21. Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2013. "Risk aversion relates to cognitive ability: Fact or Fiction?," Discussion Papers 13-10, University of Copenhagen. Department of Economics.
  22. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  23. Isaac, R Mark & James, Duncan, 2000. "Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-87, March.
  24. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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