Risk attitude in real decision proBLEMs

Fabrizio Botti (), Anna Conte (), Daniela Teresa Di Cagno () and Carlo D'Ippoliti ()

Quaderni DPTEA from Department of Economic and Business Sciences, LUISS Guido Carli

Abstract: Experimental economics focuses on eliciting preferences, studying individuals one at a time to take into account their heterogeneity. Experiments have the appealing property of collecting enough observations to perform such an analysis. In real word, and in natural experiments, individuals cannot be observed according to experimenters’ needs. We propose a method that aggregates over individuals taking into account their heterogeneity. Using data from a natural experiment, we estimate three models of decision making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. Our results show that individual-wise analyses can be substituted by pooled approaches without losing information about individual heterogeneity.

Keywords: Panel Data; Unobserved heterogeneity; Choice under risk (search for similar items in EconPapers)
JEL-codes: C15 C23 C25 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
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Persistent link: http://EconPapers.repec.org/RePEc:lui:wpaper:144

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