Investigating inconsistencies in complex lotteries: The role of cognitive skills of low-numeracy subjects

Selina Bruns, Daniel Hermann and Oliver Musshoff

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2022, vol. 97, issue C

Abstract: Comprehension in risk elicitation tasks is crucial, as otherwise the results are rather noisy than reliable. One prominent risk-elicitation tool, the Holt and Laury task (HL-task), is particularly prone to a noisy outcome - indicated by high inconsistency levels - when used among low-literacy subjects. Yet, it is unclear what drives inconsistencies. In this note we investigate the HL-task inconsistency levels of 247 smallholder farmers from rural Cambodia. Cognitive skills, measured through Raven’s Progressive Matrices (RPM), are a statistically significant determinant of inconsistency levels. A second step in the analysis reveals that cognitive skills are a statistically significant explanation for inconsistency levels for men, but not for women. Our results suggest that researchers should conduct a comprehensive pre-test when aiming at using abstract risk-elicitation methods among low-numeracy subjects in the field.

Keywords: Risk measurement; Risk attitude; Raven’s progressive matrices; Binary lottery; South-East Asia (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:97:y:2022:i:c:s2214804322000167

DOI: 10.1016/j.socec.2022.101840

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