Discussion Paper
No. 2012-19 | March 28, 2012
Andreas C. Drichoutis and Phoebe Koundouri
Estimating Risk Attitudes in Conventional and Artefactual Lab Experiments: The Importance of the Underlying Assumptions

Abstract

In this paper the authors assess the importance of sample type in the estimation of risk preferences. The authors elicit and compare risk preferences from student subjects and subjects drawn from the general population, using the multiple price list method devised by Holt and Laury (Risk aversion and incentive effects, 2002). The authors find evidence suggesting that under Rank Dependent Utility and an expo-power function, students exhibit similar risk attitudes to subjects drawn from the general population. However, when the authors assume an incorrect characterization of risk preferences, in particular they adopt the framework of Expected Utility theory and a Constant Relative Risk Aversion function, their estimation results lead to erroneous inferences. In this case, students are on average risk averse, while subjects drawn from the general population exhibit risk loving preferences. The results have implications for economic policy making under uncertainty.

Data Set

JEL Classification:

C91, D81, D01

Links

Cite As

[Please cite the corresponding journal article] Andreas C. Drichoutis and Phoebe Koundouri (2012). Estimating Risk Attitudes in Conventional and Artefactual Lab Experiments: The Importance of the Underlying Assumptions. Economics Discussion Papers, No 2012-19, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-19


Comments and Questions



Anonymous - Referee Report 1
June 13, 2012 - 09:25
See attached file

Andreas C. Drichoutis and Phoebe Koundouri - Reply to Referee Report 1
July 03, 2012 - 09:11
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Andreas C. Drichoutis and Phoebe Koundouri - New version of the paper
July 03, 2012 - 09:12
See attached file

Anonymous - Referee Report 2
July 04, 2012 - 08:57
See attached file

Andreas C. Drichoutis and Phoebe Koundouri - Reply to Referee Report 2
September 05, 2012 - 11:04
See attached file

Andreas C. Drichoutis and Phoebe Koundouri - New version of the paper
September 05, 2012 - 11:08
See attached file