Stability of Risk Preferences During COVID-19: Evidence From Four Measurements

Abstract

This article studies the stability of risk-preference during the COVID-19 pandemic. The results differ between risk-preference measurements and also men and women. We use March 13, 2020, when President Trump declared a national state of emergency as a time anchor to define the pre-pandemic and on-pandemic periods. The pre-pandemic experiment was conducted on February 21, 2020. There are three on-pandemic rounds conducted 10 days, 15 days, and 20 days after the COVID-19 emergency declaration. We include four different risk-preference measures. Men are more sensitive to the pandemic and become more risk-averse based on the Balloon Analogue Risk Task (BART). Women become more risk-averse in the Social and Experience Seeking domains based on the results from the Domain-Specific Risk-Taking (DOSPERT) and Sensation Seeking Scales (SSS). Both men's and women's risk-preference are stable during COVID-19 based on a Gamble Choice (GC) task. The results match our hypotheses which are based on the discussion about whether the psychological construct of risk-preference is general or domain-specific. The differential outcomes between incentivized behavioral and self-reported propensity measures of risk-preference in our experiment show the caveats for studies using a single measure to test risk-preference changes during COVID-19.

Permanent Instability of Preferences after COVID-19 Crisis: A Natural Experiment from Urban Burkina Faso

“…It implies that, in response to this additional background risk and even though the risks are independent, individuals behave in a more risk-averse manner for avoidable risks (Gollier and Pratt, 1996;Eeckhoudt et al, 1996). Individuals reduce their exposure to avoidable risks in order to control their overall risk exposure (Zhang and Palma, 2022;Kimball, 1993). Macroeconomic and financial evidence confirms these theoretical predictions: the presence of (uninsurable) labor income risks alters saving and consumption behaviors, as well as the demand for insurance (Guiso and Paiella, 2008).…”

“…Because women's initial level of risk aversion is higher than men's, the effect of a shock may be greater for men because they have more room to change. Some studies on the instability of risk aversion are disaggregated by gender but yield conflicting results: Hanaoka et al (2018) suggests that men's risk aversion is more likely to change than women's after an earthquake in Japan, while Zhang and Palma (2022), studying the effect of the first Covid-19 lockdown in China, finds that the differential results vary depending on the method used to measure risk preferences. As a result, we cannot determine whether preference instability might have been greater for men had they been in our sample.…”

Time and risk preferences and the perceived effectiveness of incentives to comply with diabetic retinopathy screening among older adults with type 2 diabetes

“…Utility curvature, which refers to one’s attitudes toward risks with positive rewards ( Zhang and Palma, 2022 ), also plays a role in the decision-making of diabetic self-management that involves risks and uncertainties. Utility curvature is associated with better self-care behaviors ( Simon-Tuval et al, 2016 ), better medication adherence ( Simon-Tuval et al, 2018 ; Reach et al, 2018b ), and a smaller risk of developing diabetic complications ( Emoto et al, 2015 ).…”

Positive and Negative Risk-Taking in Adolescence and Early Adulthood: A Citizen Science Study During the COVID-19 Pandemic

“…Despite the shift toward a more integrated study of negative and positive forms of risk-taking, relatively little is known about the role that macro-factors such as societal context, culture, and socioeconomic status play in risk-taking tendences (for a recent study on socioeconomic factors, see Jia et al, 2021 ). This integrated macro-factor perspective is important, because risk-taking preferences are found to be domain- and context-specific ( Frey et al, 2017 ; Zhang and Palma, 2022 ). This means that positive and negative risk-taking in one domain (i.e., positive social risks during COVID-19) does not necessarily correlate with risk-taking in another domain (i.e., negative health risks during COVID-19).…”