Asymmetric noise and systematic biases: A new look at the Trade-Off method

Thibault Richard and Valentin Baudin

Economics Letters, 2020, vol. 191, issue C

Abstract: This paper investigates the role of error propagation in one of the most popular risk preferences elicitation procedures: the trade-off method. This paper shows that the reasonable hypothesis of an asymmetric distribution of the answers can generate a systematic bias in the estimation of the utility function.

Keywords: Trade-Off method; Risk preferences; Utility function; Biases; Noise; Simulations (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:191:y:2020:i:c:s0165176520301075

DOI: 10.1016/j.econlet.2020.109132

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