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Higher Order Risk Preferences: Experimental Measures, Determinants and Related Field Behavior

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  • Schneider, Sebastian O.
  • Sutter, Matthias

Abstract

Higher order risk preferences are well-known for their relation with precautionary saving or portfolio allocation. Theoretically, they are also connected with other important behavior, such as health-related or eco-friendly behavior, but these relations have never been investigated with field data. In a large-scale experiment with 658 adolescents, we relate experimental measures of higher order risk preferences with field behavior. Field behavior is collected in an extensive survey, where we focus on general risk taking, the environmental and the health domain, particularly on addictive behavior. Using a novel method allowing the experimental elicitation of intensities of prudence and temperance, we find females behaving more risk averse, prudent and temperant, and high-ability students behaving less risk averse and temperant. We confirm previous findings on financial decision making and higher order risk preferences, and find that prudence is a strong predictor for health-related behavior: An index capturing the obsessive use of smartphones is predicted significantly by prudence, but not by risk aversion or temperance.

Suggested Citation

  • Schneider, Sebastian O. & Sutter, Matthias, 2020. "Higher Order Risk Preferences: Experimental Measures, Determinants and Related Field Behavior," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224643, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc20:224643
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    2. Werthschulte, Madeline & Löschel, Andreas, 2021. "On the role of present bias and biased price beliefs in household energy consumption," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).

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    Keywords

    Higher order risk; prudence; temperance; field behavior; adolescents; health; addictive behavior; smartphone addiction;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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