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Measuring Individual Risk Attitudes in the Lab: Task or Ask? An Empirical Comparison

Jan-Erik Loennqvist, Markku Verkasalo, Gari Walkowitz () and Philipp Wichardt
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Jan-Erik Loennqvist: Faculty of Behavioural Sciences, University of Helsinki, Finland
Markku Verkasalo: Faculty of Behavioural Sciences, University of Helsinki, Finland

No 02-03, Cologne Graduate School Working Paper Series from Cologne Graduate School in Management, Economics and Social Sciences

Abstract: This paper compares two prominent empirical measures of individual risk attitudes - the Holt and Laury (2002) lottery-choice task and the multi-item questionnaire advocated by Dohmen, Falk, Huffman, Schupp, Sunde and Wagner (forthcoming) - with respect to (a) their within-subject stability over time (one year) and (b) their correlation with actual risk-taking behaviour in the lab - here the amount sent in a trust game (Berg, Dickaut, McCabe, 1995). As it turns out, the measures themselves are uncorrelated (both times) and, most importantly, only the questionnaire measure exhibits test-re-test stability (rho = .78), while virtually no such stability is found in the lottery-choice task. In addition, only the questionnaire measure shows the expected correlations with a Big Five personality measure and is correlated with actual risk-taking behaviour. The results suggest that the questionnaire measure is a better measure of individual risk attitudes than the lottery-choice task. Moreover, with respect to trust, the high re-test stability of trust transfers (rho = .70) further supports the conjecture that trusting behaviour indeed has a component which itself is a stable individual characteristic (Glaeser, Laibson, Scheinkman and Soutter, 2000).

Keywords: Risk Attitudes; Trust; Personality; Lab Experiments (search for similar items in EconPapers)
JEL-codes: D81 C91 Z10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-neu and nep-upt
Date: 2011-02-18
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Related works:
Working Paper: Measuring Individual Risk Attitudes in the Lab: Task or Ask? An Empirical Comparison (2014) Downloads
Working Paper: Measuring Individual Risk Attitudes in the Lab: Task or Ask?: An Empirical Comparison (2011) Downloads
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