HKC08 - Neglect at Your Own Risk? Evidence on Risk-Taking Prevalence and Motives from the Field

Saurabh Bhargava and Timothy Hyde
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Saurabh Bhargava: New York University
Timothy Hyde: Department of Economics, Oberlin College, https://www.oberlin.edu/arts-and-sciences/departments/economics

No 2605, Oberlin College Kasper Economics and Business Working Papers Series from Oberlin College, Department of Economics

Abstract: We study risky choice in a field setting where employees choose among goal-reward contracts resembling financial lotteries and where we observe both choices and beliefs. We find risk aversion and choice heterogeneity far exceeding expected utility predictions and unexplained by prominent behavioral motives like overconfidence, nonlinear decision weights, and loss aversion. We propose and experimentally validate a heuristic explanation for risk taking involving contingency neglect during pairwise evaluation. The heuristic fits the field and lab data better than leading alternative models, uniquely predicts the belief distortions and framing effects we document, and offers a potential explanation for empirical insurance puzzles.

Pages: 86 pages
Date: 2026-08-01
New Economics Papers: this item is included in nep-cbe, nep-dcm, nep-exp and nep-upt
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