Prudence, Emotional State, Personality, and Cognitive Ability

Breaban, Adriana; Kuilen, Gijs van de; Noussair, Charles

doi:10.3389/fpsyg.2016.01688

Cited by 27 publications

(23 citation statements)

References 46 publications

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“…Based on these definitions, risk aversion and prudence have been measured in a series of papers (see Trautmann and van de Kuilen (2018) for a survey). Most of these papers elicit risk preferences in the gain domain using choices between lottery pairs (Ebert and Wiesen 2011;Noussair et al 2014;Deck and Schlesinger 2014;Breaban et al 2016;Haering et al 2020;Ebert and van de Kuilen 2017;Baillon et al 2018). Some alternatively elicit risk and prudence premia using a multiple price list (Ebert and Wiesen 2014;Heinrich and Mayrhofer 2018) or elicit preferences in the loss domain (Maier and Rüger 2012;Bleichrodt and van Bruggen 2018).…”

Section: Introductionmentioning

confidence: 99%

The development of risk aversion and prudence in Chinese children and adolescents

Heinrich

Shachat

2020

J Risk Uncertain

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This study experimentally evaluates the risk preferences of children and adolescents living in an urban Chinese environment. We use a simple binary choice task that tests risk aversion, as well as prudence. This is the first test for prudence in children and adolescents. Our results reveal that subjects from grades 5 to 11 (10 to 17 years) make mostly risk-averse and prudent choices. The choices of 3rd graders (8 to 9 years) do not differ statistically from risk neutral benchmarks, but at the same time they make mostly prudent choices. We also find evidence for a transmission of risk preferences. There is positive correlation between all children’s and their parents’ tendency to make risk-averse choices. There is also positive correlation between girls’ and their parents’ tendency to make prudent choices.

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Section: Introductionmentioning

confidence: 99%

The development of risk aversion and prudence in Chinese children and adolescents

Heinrich

Shachat

2020

J Risk Uncertain

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“…Previous work has provided indication that various measures of cognitive ability are positively related to both risk aversion ( Dohmen et al, 2010 ) and prudence ( Noussair et al, 2014 ;Breaban et al, 2016 ), though typically examined in adults. These relationships in adolescence have received little attention thus far, despite the evident promise in identifying at-risk adolescents.…”

Section: Introductionmentioning

confidence: 99%

The role of demographics on adolescents’ preferences for risk, ambiguity, and prudence

Fairley

Sanfey

2020

Journal of Economic Behavior & Organization

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Given adolescents' propensity to engage in risky activities, experimentally elicited risk preferences have received much attention in this demographic group. In order to address the likelihood of engaging in potentially harmful activities, this study investigates various correlates of adolescents' risk preferences. Few studies have looked at other dimensions of decision-making under uncertainty in this important population, and here we attempted to close this gap by conducting a "lab in the field" experiment with adolescents. Our goals were twofold. First, we assessed both standard risk preferences during adolescence, as well as those of ambiguity and the higher order concept of prudence. Second, we examined the influence of individual characteristics of the decision-maker on attitudes towards risk, ambiguity, and prudence. In addition to gender and age, we focused on cognitive and noncognitive abilities as potential moderators of interest Our results demonstrated that adolescents are risk neutral on average, however they are also typically ambiguity averse and display prudent behavior. Also, we found that various individual factors influenced adolescents' attitudes towards risk, ambiguity, and prudence. These specific characterizations can greatly aid in targeting policy in adolescence, and we conclude by suggesting several possibilities for these interventions.

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“…In addition to the economic parameters discussed above, there is also reason to believe that the emotional state of an individual might influence how the shocks affect his willingness to accept risks. It is known that emotional state can affect decision-making under risk (Hsee and Rottenstreich, 2004 ; De Martino et al, 2006 ; Knutson et al, 2008 ; Nguyen and Noussair, 2014 ; Breaban et al, 2016 ). The emotional state may differ depending on how the wealth shock arose.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Wealth Shocks on Loss Aversion: Behavior and Neural Correlates

et al. 2017

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Kahneman and Tversky (1979) first demonstrated that when individuals decide whether or not to accept a gamble, potential losses receive more weight than possible gains in the decision. This phenomenon is referred to as loss aversion. We investigated how loss aversion in risky financial decisions is influenced by sudden changes to wealth, employing both behavioral and neurobiological measures. We implemented an fMRI experimental paradigm, based on that employed by Tom et al. (2007). There are two treatments, called RANDOM and CONTINGENT. In RANDOM, the baseline setting, the changes to wealth, referred to as wealth shocks in economics, are independent of the actual choices participants make. Under CONTINGENT, we induce the belief that the changes in income are a consequence of subjects' own decisions. The magnitudes and sequence of the shocks to wealth are identical between the CONTINGENT and RANDOM treatments. We investigated whether more loss aversion existed in one treatment than another. The behavioral results showed significantly greater loss aversion in CONTINGENT compared to RANDOM after a negative wealth shock. No differences were observed in the response to positive shocks. The fMRI results revealed a neural loss aversion network, comprising the bilateral striatum, amygdala and dorsal anterior cingulate cortex that was common to the CONTINGENT and RANDOM tasks. However, the ventral prefrontal cortex, primary somatosensory cortex and superior occipital cortex, showed greater activation in response to a negative change in wealth due to individual's own decisions than when the change was exogenous. These results indicate that striatum activation correlates with loss aversion independently of the source of the shock, and that the ventral prefrontal cortex (vPFC) codes the experimental manipulation of agency in one's actions influencing loss aversion.

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Prudence, Emotional State, Personality, and Cognitive Ability

Cited by 27 publications

References 46 publications

The development of risk aversion and prudence in Chinese children and adolescents

The development of risk aversion and prudence in Chinese children and adolescents

The role of demographics on adolescents’ preferences for risk, ambiguity, and prudence

The Effect of Wealth Shocks on Loss Aversion: Behavior and Neural Correlates

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