Risk attitudes of children and adults: choices over small and large probability gains and losses

William Harbaugh (), Kate Krause () and Lise Vesterlund ()
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Kate Krause: University of New Mexico Economics Department

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

Abstract: In this paper we examine how risk attitudes change with age. We present participants from age 5 to 64 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.

Date: 1999-01-01
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Related works:
Journal Article: Risk Attitudes of Children and Adults: Choices Over Small and Large Probability Gains and Losses (2002)
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