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Risk attitude in real decision proBLEMs

Listed author(s):
  • Fabrizio Botti

    ()

    (LUISS Guido Carli)

  • Anna Conte

    ()

    (University of Rome II “Tor Vergata”, University of Rome I “La Sapienza”, and LUISS Guido Carli)

  • Daniela T. Di Cagno

    ()

    (LUISS Guido Carli)

  • Carlo D'Ippoliti

    ()

    (University of Rome I “La Sapienza”, and LUISS Guido Carli)

Experimental economics focuses on eliciting preferences, studying individuals one at a time to take into account their heterogeneity. Experiments have the appealing property of collecting enough observations to perform such an analysis. In real word, and in natural experiments, individuals cannot be observed according to experimenters’ needs. We propose a method that aggregates over individuals taking into account their heterogeneity. Using data from a natural experiment, we estimate three models of decision making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. Our results show that individual-wise analyses can be substituted by pooled approaches without losing information about individual heterogeneity.

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Paper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Quaderni DEF with number 144.

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Handle: RePEc:lui:wpaper:144
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