Reconsidering Risk Aversion

Daniel Benjamin, Mark Alan Fontana and Miles Kimball

No 28007, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Risk aversion is typically inferred from real or hypothetical choices over risky lotteries, but such “untutored” choices may reflect mistakes rather than preferences. We develop a procedure to obtain a better measure of normatively relevant preferences: after eliciting untutored choices, we confront participants with their choices that are inconsistent with intertemporal-expected-utility axioms and allow them to reconsider their choices. We demonstrate this procedure via a survey about hypothetical retirement investment choices administered to 596 Cornell students. We find that, on average, reconsidered choices are more consistent with almost all axioms, with one exception related to a counterfactual reference point.

JEL-codes: D63 D81 G11 H8 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-upt
Note: AG PE
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Citations: View citations in EconPapers (2)

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