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Heterogeneity in Risky Choice Behaviour in a Broad Population

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  • Gaudecker, Hans-Martin von

    (University of Bonn)

  • van Soest, Arthur

    (Tilburg University)

  • Wengström, Erik

    (Lund University)

Abstract

We analyse risk preferences using an experiment with real incentives in a representative sample of 1,422 Dutch respondents. Our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics: Utility curvature, loss aversion, preferences towards the timing of uncertainty resolution, and the propensity to choose randomly rather than on the basis of preferences. We find that all four parameters contribute to explaining choice behaviour. The structural parameters are significantly associated with socio-economic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data.

Suggested Citation

  • Gaudecker, Hans-Martin von & van Soest, Arthur & Wengström, Erik, 2009. "Heterogeneity in Risky Choice Behaviour in a Broad Population," IZA Discussion Papers 4022, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4022
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    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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