Risking the Future? Measuring Risk Attitudes towards Delayed Consequences

Emmanuel Kemel () and Corina Paraschiv ()
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Emmanuel Kemel: GREGHEC - Groupement de Recherche et d'Etudes en Gestion - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, HEC Paris - Ecole des Hautes Etudes Commerciales, CNRS - Centre National de la Recherche Scientifique
Corina Paraschiv: LIRAES (URP_ 4470) - Laboratoire Interdisciplinaire de Recherche Appliquée en Economie de la Santé - UPCité - Université Paris Cité

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Abstract: This paper presents an experiment that investigates differences of risk attitudes in decisions with immediate versus delayed consequences. Our experimental design allows to control for the effects of discounting and timing of risk resolution. We show that individuals are more risk tolerant in situations involving delayed consequences. Investigations based on rank-dependent utility show that this finding is mainly driven by probability weighting. More precisely, probability weighting is more elevated for delayed consequences, suggesting an overall increase in decision maker's optimism regarding the chances of success associated to risks for which consequences materialize in the future.

Keywords: Risk Attitudes; Time; Rank Dependent Utility; Delay; Future Consequences D81; D90; C91 (search for similar items in EconPapers)
Date: 2021-08-31
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-isf, nep-rmg and nep-upt
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