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Eliciting risk and time preferences under induced mood states

  • Drichoutis, Andreas
  • Nayga, Rodolfo

We test whether induced mood states have an effect on elicited risk and time preferences in a conventional laboratory experiment. We jointly estimate risk and time preferences and use a mixture specification that allows choices to be consistent with Expected Utility theory or with probability weighting. Time preferences between subjects in the control, positive mood, and negative mood treatments are not statistically significantly different. However, for choices consistent with Expected Utility Theory, we find that subjects induced into a negative mood exhibit higher risk aversion than those in either the control treatment or the positive mood treatment. For choices that are consistent with probability weighting, we find that positive mood increases risk aversion. Results also suggest that risk preferences are affected by whether a cognitively demanding task precedes a risk preference elicitation task or whether subjects were placed in a gender-specific session rather than a mixed-gender session.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33013.

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Date of creation: Dec 2010
Date of revision: 27 Aug 2011
Handle: RePEc:pra:mprapa:33013
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