Incentive Effects on Risk Attitude in Small Probability Prospects
Most studies on the role of incentives on risk attitude report data obtained from within-subject experimental investigations. This may however raise an issue of sequentiality of effects as later choices may be influenced by earlier ones. This paper reports instead between-subject results on the effect of monetary stakes on risk attitudes for small probability prospects in a laboratory experiment. Under low stakes, we find the typical risk seeking behavior for small probabilities predicted by the prospect theory. But under high stakes, we provide some evidence that risk seeking behavior is dramatically reduced. This could suggest that utility is not consistently concave over the outcome space, but rather contains a convex section for very small amounts.
|Date of creation:||2009|
|Publication status:||Published in Working Paper GATE 2009-26. 2009|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00435957|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bradley, Ian, 2003. "The representative bettor, bet size, and prospect theory," Economics Letters, Elsevier, vol. 78(3), pages 409-413, March.
- Drazen Prelec & George Loewenstein, 1991. "Decision Making Over Time and Under Uncertainty: A Common Approach," Management Science, INFORMS, vol. 37(7), pages 770-786, July.
- Hans Binswanger, 1980.
"Attitudes toward risk: Experimental measurement in rural india,"
Artefactual Field Experiments
00009, The Field Experiments Website.
- Hans P. Binswanger, 1980. "Attitudes Toward Risk: Experimental Measurement in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
- Camerer, Colin F & Hogarth, Robin M, 1999.
"The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework,"
Journal of Risk and Uncertainty,
Springer, vol. 19(1-3), pages 7-42, December.
- Camerer, Colin F. & Hogarth, Robin M., 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Working Papers 1059, California Institute of Technology, Division of the Humanities and Social Sciences.
- Mohammed Abdellaoui & Han Bleichrodt & Olivier L’Haridon, 2008. "A tractable method to measure utility and loss aversion under prospect theory," Journal of Risk and Uncertainty, Springer, vol. 36(3), pages 245-266, June.
- Sawyer, Alan G, 1975. " Demand Artifacts in Laboratory Experiments in Consumer Research," Journal of Consumer Research, Oxford University Press, vol. 1(4), pages 20-30, March.
- Han Bleichrodt & Jose Luis Pinto, 2000. "A Parameter-Free Elicitation of the Probability Weighting Function in Medical Decision Analysis," Management Science, INFORMS, vol. 46(11), pages 1485-1496, November.
- Booij, Adam S. & van de Kuilen, Gijs, 2009. "A parameter-free analysis of the utility of money for the general population under prospect theory," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 651-666, August.
- Harry Markowitz, 1952. "The Utility of Wealth," Journal of Political Economy, University of Chicago Press, vol. 60, pages 151-151.
- Johansson-Stenman, Olof & Mahmud, Minhaj & Martinsson, Peter, 2004.
"Does stake size matter in trust games?,"
Working Papers in Economics
140, University of Gothenburg, Department of Economics.
- Mathieu Lefebvre & Ferdinand Vieider & Marie Claire Villeval, 2009.
"The Ratio Bias Phenomenon : Fact or Artifact ?,"
- Mathieu Lefebvre & Ferdinand Vieider & Marie-Claire Villeval, 2009. "The Ratio Bias Phenomenon : Fact or Artifact ?," Working Papers 0925, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- Mathieu Lefebvre & Ferdinand Vieider & Marie Claire Villeval, 2011. "The Ratio Bias Phenomenon : Fact or Artifact ?," Post-Print halshs-00435956, HAL.
- Lefèbvre, Mathieu & Vieider, Ferdinand M. & Villeval, Marie Claire, 2009. "The Ratio Bias Phenomenon: Fact or Artifact?," IZA Discussion Papers 4546, Institute for the Study of Labor (IZA).
- 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.
- Antoni Bosch-Domènech & Joaquim Silvestre, 1999.
"Does risk aversion or attraction depend on income? An experiment,"
Economics Working Papers
361, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 1999.
- Bosch-Domenech, Antoni & Silvestre, Joaquim, 1999. "Does risk aversion or attraction depend on income? An experiment," Economics Letters, Elsevier, vol. 65(3), pages 265-273, December.
- Thomas Astebro & José Mata & Luis Santos-Pinto, 2009.
"Preference for Skew in Lotteries: Evidence from the Laboratory,"
Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP)
09.09, Université de Lausanne, Faculté des HEC, DEEP.
- Santos-Pinto, Luís & Astebro, Thomas & Mata, José, 2009. "Preference for Skew in Lotteries: Evidence from the Laboratory," MPRA Paper 17165, University Library of Munich, Germany.
- Kocher, Martin G. & Martinsson, Peter & Visser, Martine, 2008.
"Does stake size matter for cooperation and punishment?,"
Elsevier, vol. 99(3), pages 508-511, June.
- Kocher, Martin G. & Martinsson, Peter & Visser, Martine, 2008. "Does stake size matter for cooperation and punishment?," Munich Reprints in Economics 18191, University of Munich, Department of Economics.
- Martin G. Kocher & Peter Martinsson & Martine Visser, 2006. "Does Stake Size matter for Cooperation and Punishment?," Tinbergen Institute Discussion Papers 06-104/1, Tinbergen Institute.
- George Wu & Richard Gonzalez, 1996. "Curvature of the Probability Weighting Function," Management Science, INFORMS, vol. 42(12), pages 1676-1690, December.
- Kuhberger, Anton & Schulte-Mecklenbeck, Michael & Perner, Josef, 2002. "Framing decisions: Hypothetical and real," Organizational Behavior and Human Decision Processes, Elsevier, vol. 89(2), pages 1162-1175, November.
- Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
- Kachelmeier, Steven J & Shehata, Mohamed, 1992. "Examining Risk Preferences under High Monetary Incentives: Experimental Evidence from the People's Republic of China," American Economic Review, American Economic Association, vol. 82(5), pages 1120-1141, December.
- Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. "Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
- Mohammed Abdellaoui, 2000. "Parameter-Free Elicitation of Utility and Probability Weighting Functions," Management Science, INFORMS, vol. 46(11), pages 1497-1512, November.