Risk Aversion When Gains Are Likely and Unlikely: Evidence from a Natural Experiment with Large Stakes

Pavlo Blavatskyy and Ganna Pogrebna

No 278, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: In the television show Affari Tuoi a contestant is endowed with a sealed box containing a monetary prize between one cent and half a million euros. In the course of the show the contestant learns more information about the distribution of possible monetary prizes inside her box. Consider two groups of contestants, who learned that the chances of their boxes containing a large prize are 20% and 80% correspondingly. Contestants in both groups receive qualitatively similar price offers for selling the content of their boxes. If contestants are less risk averse when facing unlikely gains, the price offer is likely to be more frequently rejected in the first group than in the second group. However, the fraction of rejections is virtually identical across two groups. Thus, contestants appear to have identical risk attitudes over (large) gains of low and high probability.

Keywords: risk attitude; risk aversion; risk seeking; natural experiment (search for similar items in EconPapers)
JEL-codes: C93 D81 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-fmk and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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