Abstract
Higher-order risk preferences are important determinants of economic behavior. We apply insights from behavioral economics: we measure higher-order risk preferences for pure gains and losses. We find a reflection effect not only for second-order risk preferences, as did Kahneman and Tversky (1979), but also for higher-order risk preferences: we find risk aversion, prudence and intemperance for gains and much more risk-loving preferences, imprudence and temperance for losses. These findings are at odds with a universal preference for combining good with bad or good with good, which previous results suggest may underlie higher-order risk preferences.
| Original language | English |
|---|---|
| Pages (from-to) | 705-717 |
| Number of pages | 13 |
| Journal | Review of Economics and Statistics |
| Volume | 104 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - Jul 2022 |
Keywords
- risk apportionment
- higher order risk preferences
- risk aversion
- prudence
- temperance
- reference dependence