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All Over the Map: Heterogeneity of Risk Preferences across Individuals, Prospects, and Countries

Author

Listed:
  • Olivier l'Haridon

    (Université de Rennes)

  • Ferdinand Vieider

    (Department of Economics, University of Reading)

Abstract

We analyze the risk preferences of 2939 subjects across 30 countries on all continents. Using structural modeling, we explore heterogeneity in risk preferences across three dimensions: i) between individuals; ii) between prospects; and iii) between countries. Preferences in non-Western countries differ systematically from those found inWestern countries, hitherto considered universal. Reference-dependence and likelihood-dependence are both found to play a role in describing preferences. While we confirm previous results on individual characteristics explaining little of overall preference heterogeneity, between countries a few macroeconomic indicators can explain a considerable part of the heterogeneity. The heterogeneity explained furthermore differs across decision parameters, being low for pure risk aversion measures, but higher for measures of noise and for rationality parameters.

Suggested Citation

  • Olivier l'Haridon & Ferdinand Vieider, 2016. "All Over the Map: Heterogeneity of Risk Preferences across Individuals, Prospects, and Countries," Economics Discussion Papers em-dp2016-04, Department of Economics, University of Reading.
    • Handle: RePEc:rdg:emxxdp:em-dp2016-04
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    Cited by:

    1. Bouchouicha, Ranoua & Martinsson, Peter & Medhin, Haileselassie & Vieider, Ferdinand M., 2017. "Stake effects on ambiguity attitudes for gains and losses," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 83(1), pages 19-35.
    2. Ferdinand Vieider, 2016. "Certainty Preference, Random Choice, and Loss Aversion: A Comment on "Violence and Risk Preference: Experimental Evidence from Afghanistan"," Economics Discussion Papers em-dp2016-06, Department of Economics, University of Reading.
    3. Vieider, Ferdinand M. & Truong, Nghi & Martinsson, Peter & Pham Khanh Nam & Martinsson, Peter, 2013. "Risk preferences and development revisited: A field experiment in Vietnam," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2013-403, WZB Berlin Social Science Center.
    4. Ranoua Bouchouicha & Ferdinand M. Vieider, 2017. "Accommodating stake effects under prospect theory," Journal of Risk and Uncertainty, Springer, vol. 55(1), pages 1-28, August.

    More about this item

    Keywords

    risk preferences; heterogeneity;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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