The effect of fast and slow decisions on risk taking

Michael Kirchler, David Andersson, Caroline Bonn, Magnus Johannesson, Erik Sørensen, Matthias Stefan, Gustav Tinghög and Daniel Västfjäll
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Michael Kirchler: University of Innsbruck
David Andersson: Linköping University
Caroline Bonn: University of Innsbruck
Matthias Stefan: University of Innsbruck
Gustav Tinghög: Linköping University
Daniel Västfjäll: Linköping University

Journal of Risk and Uncertainty, 2017, vol. 54, issue 1, No 3, 37-59

Abstract: Abstract We experimentally compare fast and slow decisions in a series of experiments on financial risk taking in three countries involving over 1700 subjects. To manipulate fast and slow decisions, subjects were randomly allocated to responding within 7 seconds (time pressure) or waiting for at least 7 or 20 seconds (time delay) before responding. To control for different effects of time pressure and time delay on measurement noise, we estimate separate parameters for noise and risk preferences within a random utility framework. We find that time pressure increases risk aversion for gains and risk taking for losses compared to time delay, implying that time pressure increases the reflection effect of Prospect Theory. The results for gains are weaker and less robust than the results for losses. We find no significant difference between time pressure and time delay for loss aversion (tested in only one of the experiments). Time delay also leads to less measurement noise than time pressure and unconstrained decisions, and appears to be an effective way of decreasing noise in experiments.

Keywords: Prospect Theory; Experimental economics; Time pressure; Measurement noise; C91; C93; D81 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (34)

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DOI: 10.1007/s11166-017-9252-4

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