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The Fourfold Pattern of Risk Attitudes in Choice and Pricing Tasks

  • Lise Vesterlund
  • Bill Harbaugh
  • Kate Krause

We examine the robustness of the fourfold pattern of risk attitudes under two elicitation procedures. We find that individuals are, on average, risk-seeking over low-probability gains and high-probability losses and risk-averse over high-probability gains and low-probability losses when we elicit prices for the gambles. However, a choice-based elicitation procedure, where participants choose between a gamble and its expected value, yields individual decisions that are indistinguishable from random choice. Sensitivity to elicitation procedure holds between and within participants, and remains when participants are allowed to review and change decisions. The price elicitation procedure is more complex; this finding may be further evidence that an increase in cognitive load exacerbates behavioural anomalies. Copyright � The Author(s). Journal compilation � Royal Economic Society 2009.

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Paper provided by University of Pittsburgh, Department of Economics in its series Working Papers with number 268.

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Date of creation: Jan 2005
Date of revision: Jan 2005
Handle: RePEc:pit:wpaper:268
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