Prudence and prevention: an economic laboratory experiment

Krieger, Miriam; Mayrhofer, Thomas

doi:10.1080/13504851.2016.1158909

Cited by 29 publications

(12 citation statements)

References 23 publications

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“…() also measure ambiguity prudence and ambiguity temperance based on the preference conditions by Baillon (). Other experimental studies have observed that higher order risks influence precautionary savings (Bostian and Heinzel, ), as well as behavior in auctions (Kocher et al., ) and medical treatment and prevention decisions (Krieger and Mayrhofer, , ). Moreover, higher order risk preferences have also been studied experimentally in social settings (Heinrich and Mayrhofer, ), across multiple domains (Ebert and van de Kuilen, ; Deck and Schlesinger, ) and with children (Heinrich and Shachat, ).…”

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confidence: 98%

Exploring the Consistency of Higher Order Risk Preferences

Haering

Heinrich

Mayrhofer

2020

Int Economic Review

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This study measures higher order risk preferences and their consistency. We explore the role of country differences, the variation of stakes, and the framing of lotteries. We observe a robust dichotomous pattern of choice behavior in China, the United States, and Germany. The majority of choices are consistent with mixed risk aversion or mixed risk‐loving behavior. We also find this pattern after a 10‐fold increase in the stakes. Finally, our results reveal that this pattern is strengthened if the lotteries are displayed in compound instead of reduced form. In a follow‐up study, we explore potential explanations for this framing effect.

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confidence: 98%

Exploring the Consistency of Higher Order Risk Preferences

Haering

Heinrich

Mayrhofer

2020

Int Economic Review

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“…andBaillon et al [2018] observe that the majority of people make prudent choices. Regarding the role played by the fourth moment, results are not so strong: it has been shown that the proportion of people making temperate choices is usually smaller than that making prudent ones (see, for example, Ebert and Wiesen, 2014;Heinrich and Mayrhofer, 2018;and Krieger and Mayrhofer, 2017). For a quick resume, see Appendix A1 of ?.…”

Section: Literature Reviewmentioning

confidence: 99%

Risk aversion, prudence and temperance: It is a matter of gap between moments

Colasante

Riccetti

2020

Journal of Behavioral and Experimental Finance

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Higher order risk preferences are important determinants of choices under uncertainty. We build a questionnaire different from usually adopted ones: our questionnaire is simpler in order to reduce the number of random choices, and it includes questions with largely diversified stake sizes to observe different gaps between moments. Moreover, we collect results from a large and heterogeneous population to provide more general and unbiased results. Our results confirm the preference of the majority of the respondents for higher odd and lower even moments of the expected return distribution. However, we highlight three features: (i) the importance of the gap between the values of the corresponding moments of the two choices, (ii) the behavioral change in presence of a positive/zero/negative expected value, (iii) the huge heterogeneity in behaviors, also due to the complexity of the choice as an important driver of the propensity to switch from choosing on the basis of preferences to choo sing randomly. We also find that age and geographical location are important determinants of risk propensity.

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“…Regarding the role played by the fourth moment, Deck and Schlesinger (2010) find evidence for intemperance, while Maier and Ruger (2012), Noussair et al (2014), and Deck and Schlesinger (2018) observe temperance. However, in general, results are weaker: it has been shown that the proportion of people making temperate choices is usually smaller than that making prudent ones (see, for example, Ebert and Wiesen, 2014;Heinrich and Mayrhofer, 2018;and Krieger and Mayrhofer, 2017). For a quick resume, see Appendix A1 of Haering et al (2017).…”

Section: Introductionmentioning

confidence: 99%

Financial and non-financial risk attitudes: What does it matter?

Colasante

Riccetti

2021

Journal of Behavioral and Experimental Finance

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In this paper we try to: (i) study the personal features of the subjects that can influence the risk attitude in financial and non-financial contexts, (ii) understand the correspondences among some behaviors in financial and non-financial choices. We start from the questionnaire used by Colasante and Riccetti (2020), that investigates how subjects take into account the first four moments of the return distribution in making risky decisions, and that collects data from a very large and heterogeneous population. We find that age and geographical location are important determinants of risk propensity in all domains. Moreover, we find that risk attitudes in financial and non-financial contexts are correlated, but correlation is far from 1, with a larger risk aversion in non-financial contexts. Therefore, there is a common underlying risk trait, but the context is also relevant. Interestingly, the financial risk propensity is positively correlated to the propensity to perform illegal activities.

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Prudence and prevention: an economic laboratory experiment

Cited by 29 publications

References 23 publications

Exploring the Consistency of Higher Order Risk Preferences

Exploring the Consistency of Higher Order Risk Preferences

Risk aversion, prudence and temperance: It is a matter of gap between moments

Financial and non-financial risk attitudes: What does it matter?

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