Risking the future? Measuring risk attitudes towards delayed consequences

Emmanuel Kemel and Corina Paraschiv

Journal of Economic Behavior & Organization, 2023, vol. 208, issue C, 325-344

Abstract: This paper presents an experiment that investigates differences in risk attitudes in decisions with immediate versus delayed consequences. Our experimental design allows to control for the effects of discounting and timing of risk resolution. We show that individuals are more risk tolerant in situations involving delayed consequences. Investigations based on rank-dependent utility show that this finding is mainly driven by probability weighting. More precisely, probability weighting is more elevated for delayed consequences. This suggests an overall increase in decision-makers’ optimism regarding the chances of success when consequences materialize in the future.

Keywords: Risk attitudes; Time; Rank dependent utility; Delay; Future consequences (search for similar items in EconPapers)
JEL-codes: C91 D81 D90 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:208:y:2023:i:c:p:325-344

DOI: 10.1016/j.jebo.2023.02.014

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