Exploring the consistency of higher-order risk preferences

Alexander Haering, Timo Heinrich (timo.heinrich@ibes.uni-due.de) and Thomas Mayrhofer

No 688, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: In this study we measure higher-order risk preferences and their consistency. We explore the role of country differences, the variation of stakes, and the framing of lotteries. We observe a robust dichotomous pattern of choice behavior in China, in the USA and in Germany. A large majority of choices is consistent with a preference for either (i) combining "good" outcomes with "bad" ones or (ii) combining "good" outcomes with "good" ones. We also find this pattern after a tenfold increase in the stakes. Finally, our results reveal that this pattern is strengthened if the lotteries are displayed in compound rather than reduced form. We explore potential explanations for this framing effect.

Keywords: mixed risk aversion; prudence; temperance; higher-order risk preferences (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/157630/1/885678788.pdf (application/pdf)

Related works:
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:zbw:rwirep:688

DOI: 10.4419/86788798

Access Statistics for this paper

More papers in Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).