The Effect of an Additional Alternative on Measured Risk Preferences in a Field Experiment

Jim Engle-Warnick (), Javier Escobal and Sonia Laszlo

Experimental from University Library of Munich, Germany

Abstract: We experimentally test for the effect of an additional alternative on the measured risk preferences of farmers in rural Peru. In our experiment, subjects revealed their risk preferences with a series of choices between two gambles. We added a third gamble, which was always dominated by one of the two existing gambles. We found that subjects chose this gamble nearly one quarter of the time, in some cases causing them to appear more risk loving. We conclude that the number of available alternatives should be taken into account for predicting decisions under uncertainty.

Keywords: risk preferences; risk measurement instruments; experimental economics; field experiments (search for similar items in EconPapers)
JEL-codes: C91 C93 O33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005-11-15
New Economics Papers: this item is included in nep-exp
Note: Type of Document - pdf; pages: 30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpex:0511003

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