Do as I Do, Not as I Say: Incentivization and the Relationship Between Cognitive Ability and Risk Aversion

Sergio Almeida

Revista Brasileira de Economia - RBE, 2019, vol. 73, issue 4

Abstract: We study how the use of real and hypothetical choices to elicit risk preferences affect the statistical relationship between cognitive ability and risk aversion. Our experimental results suggest that such association is sensitive to incentive conditions of the choice problems used to elicit risk preferences. Individuals in the upper tail of the cognitive ability distribution are willing to take more risks. But this holds only when choices involve hypothetical payoffs. When choices are real, this correlation is found insignificant. Results are robust to using alternative measures of cognitive ability.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:73:y:2019:i:4:a:19229

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