Eliciting Risk Preferences: When is Simple Better?

The influence of groups and alcohol consumption on individual risk-taking

“…Moreover, it has been noted that care should be taken with the complexity of gambling tasks as participants have previously revealed difficultly in understanding such tasks (Newall, 2017) while intoxicated (Dave, Eckel, Johnson, & Rojas, 2010;Proestakis et al, 2013). To this end, research investigating influence of alcohol on risky gambling behaviour provides some insight into the complexity of risk-taking, and alludes to the importance of establishing measures both understandable, and akin to real-world behaviours to better represent intoxicated gambling 'in the wild'.…”

“…For example, a lottery choice of six (17% chance of winning £6) was the riskiest option, whereas a lottery choice of one (100% chance of winning £1) was the most risk adverse. This risk-taking measure was chosen due to its cognitive simplicity, as individuals have previously experienced difficulty in understanding risktaking tasks (Dave et al, 2010;Proestakis et al, 2013). Furthermore, the duration of the task (one-two minutes) was suited to the field setting, and was not subject to practice effects.…”

Contract farming and smallholder incentives to produce high quality: experimental evidence from the Vietnamese dairy sector

“…Hence, the choice task was identical in each of the five rounds, ensuring that no treatment ordering effects confound the analysis (Harrison et al, 2005). Second, in designing the experiment we took into account that presentation of highly abstract and complex decision tasks may confuse subjects with limited numerical skills (Dave et al, 2010).…”

Learning for a bonus: How financial incentives interact with preferences

“…Considering significant heterogeneity in preferences among individuals (e.g., Harrison et al, 2002;Rabin, 1998) and among students in particular (e.g., Dave et al, 2010) we expect that incentive effects in education interact with economic preferences.…”

“…To analyze how financial incentives in education affect this intertemporal choice, it is necessary to include measures of students' economic preferences (e.g., Frederick et al, 2002;Keren and Roelofsma, 1995;Prelec and Loewenstein, 1991). Preferences vary considerably among students (Castillo et al, 2011;Dave et al, 2010), and recent literature has pointed to non-cognitive abilities (including economic preferences) as being systematically related to school achievement (Cunha and Heckman, 2010;Duckworth and Seligman, 2005;Heckman et al, 2006). Therefore, that incentive effects in education interact with economic preferences-meaning that differences in preferences might affect students' responses to financial incentives in education-might not be surprising.…”