Risk Attitudes of Children and Adults: Choices Over Small and Large Probability Gains and Losses

William Harbaugh (), Kate Krause and Lise Vesterlund ()

No 47, Artefactual Field Experiments from The Field Experiments Website

Abstract: In this paper we examine how risk attitudes change with age. We present participants from age 5 to 65 with choices between simple gambles and the expected value of the gambles. The gambles are over both gains and losses, and vary in the probability of the non-zero payoff. Surprisingly, we find that many participants are risk seeking when faced with high-probability prospects over gains and risk averse when faced with small-probability prospects. Over losses we find the exact opposite. Children's choices are consistent with the underweighting of low-probability events and the overweighting of high-probability ones. This tendency diminishes with age, and on average adults appear to use the objective probability when evaluating risky prospects.

Keywords: probability weighting; subjective expected utility; prospect theory; children; risk (search for similar items in EconPapers)
JEL-codes: D80 (search for similar items in EconPapers)
Date: Written
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Related works:
Working Paper: Risk attitudes of children and adults: choices over small and large probability gains and losses (1999)
Journal Article: Risk Attitudes of Children and Adults: Choices Over Small and Large Probability Gains and Losses (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:feb:artefa:0047

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