Risk Aversion, Demographics and Unobserved Heterogeneity. Evidence from the Italian TV Show "Affari Tuoi"

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

MIUR Dynamic Decision Making Project Working Papers from MIUR Project on Dynamic Decision Making

Abstract: Dynamically inconsistent decision makers have to decide, implicitly or explicitly, what to do about their dynamic inconsistency. Economic theorists have identified three possible responses: to act naively (thus ignoring the dynamic inconsistency), to act resolutely (not letting their inconsistency affect their behaviour) or to act sophisticatedly (hence taking into account their inconsistency). We use data from a unique experiment (which observes both behaviour and preferences) in order to distinguish these three possibilities. We find that the majority of subjects are resolute, a substantial proportion are naïve and very few are sophisticated. These results have important implications for predicting the behaviour of people in dynamic situations.

Keywords: choice under risk; natural experiment; demographic and unobserved characteristics (search for similar items in EconPapers)
JEL-codes: C15 C33 C52 C93 D81 (search for similar items in EconPapers)
Date: 2007-05

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