Inducing Risk Neutral Preferences with Binary Lotteries: A Reconsideration

Glenn Harrison, Jimmy Martínez-Correa and J. Swarthout

No 2012-02, Experimental Economics Center Working Paper Series from Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University

Abstract: We evaluate the binary lottery procedure for inducing risk neutral behavior. We strip the experimental implementation down to bare bones, taking care to avoid any potentially confounding assumption about behavior having to be made. In particular, our evaluation does not rely on the assumed validity of any strategic equilibrium behavior, or even the customary independence axiom. We show that subjects sampled from our population are generally risk averse when lotteries are defined over monetary outcomes, and that the binary lottery procedure does indeed induce a statistically significant shift towards risk neutrality. This striking result generalizes to the case in which subjects make several lottery choices and one is selected for payment.

Pages: 54
Date: 2012-01
New Economics Papers: this item is included in nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://excen.gsu.edu/workingpapers/GSU_EXCEN_WP_2012-02.pdf (application/pdf)

Related works:
Journal Article: Inducing risk neutral preferences with binary lotteries: A reconsideration (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:exc:wpaper:2012-02

Access Statistics for this paper

More papers in Experimental Economics Center Working Paper Series from Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University Contact information at EDIRC.
Bibliographic data for series maintained by J. Todd Swarthout ().