Joint measurement of risk aversion, prudence and temperance

Sebastian Ebert and Daniel Wiesen

No 20/2010, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: We propose a method to measure the intensity of risk aversion, prudence (downside risk aversion) and temperance (outer risk aversion) in experiments. Higher-order risk compensations are defined within the proper risk apportionment model of Eeckhoudt and Schlesinger [American Economic Review, 96 (2006) 280] that are elicited using a multiple price list format. This approach is not based on expected utility theory. In our experiment we find evidence for risk aversion, prudence and temperance. Women demand higher risk compensations for all orders. The highest compensation is demanded for taking downside risk, not for being (second order) risk-loving. This highlights the importance of prudence when considering economic decisions under risk.

Keywords: Decision making under risk; laboratory experiment; prudence; risk aversion; temperance; gender differences (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Joint measurement of risk aversion, prudence, and temperance (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:202010

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