How General Are Risk Preferences? Choices under Uncertainty in Different Domains

Liran Einav, Amy Finkelstein, Iuliana Pascu and Mark R. Cullen

American Economic Review, 2012, vol. 102, issue 6, 2606-38

Abstract: We analyze the extent to which individuals' choices over five employer-provided insurance coverage decisions and one 401(k) investment decision exhibit systematic patterns, as would be implied by a general utility component of risk preferences. We provide evidence consistent with an important domain-general component that operates across all insurance choices. We find a considerably weaker relationship between one's insurance decisions and 401(k) asset allocation, although this relationship appears larger for more "financially sophisticated" individuals. Estimates from a stylized coverage choice model suggest that up to 30 percent of our sample makes choices that may be consistent across all 6 domains. (JEL D12, D14, D81, G22, J33)

Date: 2012
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Related works:
Working Paper: How general are risk preferences? Choices under uncertainty in different domains (2010)
Working Paper: How General Are Risk Preferences? Choices Under Uncertainty in Different Domains (2010)
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