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Exposure to Risk and Risk Aversion: A Laboratory Experiment

Author

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  • Tai-Sen HE

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.)

  • Fuhai HONG

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.)

Abstract

We examine whether prior exposure to environments with a varying degree of risk affects individuals’ risk-taking behavior. Using a laboratory experiment, we find that subjects exposed to a high risk environment exhibit higher levels of risk aversion than those who were exposed to a moderate or low risk environment. This effect is not driven by subjects’ realized outcomes from the risk. The finding has implications for theoretical models of decision-making under uncertainty, and can speak to a few current policy debates.

Suggested Citation

  • Tai-Sen HE & Fuhai HONG, 2014. "Exposure to Risk and Risk Aversion: A Laboratory Experiment," Economic Growth Centre Working Paper Series 1403, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
  • Handle: RePEc:nan:wpaper:1403
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    File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2014/2014-03.pdf
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    References listed on IDEAS

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    Cited by:

    1. Chuang, Yating & Schechter, Laura, 2015. "Stability of experimental and survey measures of risk, time, and social preferences: A review and some new results," Journal of Development Economics, Elsevier, vol. 117(C), pages 151-170.

    More about this item

    Keywords

    Risk; Risk Aversion; Laboratory Experiment;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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