Heterogeneity in Risky Choice Behavior in a Broad Population

H.M. von Gaudecker, A.H.O. van Soest, E. Wengstrom

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Abstract

We analyse risk preferences using an experiment with real incentives in a representative sample of 1,422 Dutch respondents. Our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics: Utility curvature, loss aversion, preferences towards the timing of uncertainty resolution, and the propensity to choose randomly rather than on the basis of preferences. We find that all four parameters contribute to explaining choice behaviour. The structural parameters are significantly associated with socio-economic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Number of pages38
Volume2009-12
Publication statusPublished - 2009

Publication series

NameCentER Discussion Paper
Volume2009-12

Keywords

  • risk aversion
  • loss aversion
  • uncertainty resolution
  • field experiments

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    von Gaudecker, H. M., van Soest, A. H. O., & Wengstrom, E. (2009). Heterogeneity in Risky Choice Behavior in a Broad Population. (CentER Discussion Paper; Vol. 2009-12). Econometrics.