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Heterogeneity in Risky Choice Behavior in a Broad Population

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  • von Gaudecker, H.M.
  • van Soest, A.H.O.

    (Tilburg University, Center For Economic Research)

  • Wengstrom, E.

Abstract

We analyze risk preferences using an experiment with real incentives in a representative sample of 1,422 Dutch respondents. Our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics: utility curvature, loss aversion, preferences toward the timing of uncertainty resolution, and the propensity to choose randomly rather than on the basis of preferences. We find that all four parameters contribute to explaining choice behavior. The structural parameters are significantly associated with socioeconomic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data. (JEL D12, D81)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • von Gaudecker, H.M. & van Soest, A.H.O. & Wengstrom, E., 2009. "Heterogeneity in Risky Choice Behavior in a Broad Population," Discussion Paper 2009-12, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:0a7cd309-3b66-441c-bf79-7dc8f1f6d8f8
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    More about this item

    Keywords

    risk aversion; loss aversion; uncertainty resolution; field experiments;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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