Inducing risk neutral preferences with binary lotteries: A reconsideration

Glenn Harrison, Jimmy Martínez-Correa () and J. Swarthout

Journal of Economic Behavior & Organization, 2013, vol. 94, issue C, 145-159

Abstract: We evaluate the binary lottery procedure for inducing risk neutral behavior. We strip the experimental implementation down to bare bones, taking care to avoid any potentially confounding assumptions about behavior having to be made. In particular, our evaluation does not rely on the assumed validity of any strategic equilibrium behavior, or even the customary independence axiom. We show that subjects sampled from our population are generally risk averse when lotteries are defined over monetary outcomes, and that the binary lottery procedure does indeed induce a statistically significant shift toward risk neutrality. This striking result generalizes to the case in which subjects make several lottery choices and one is selected for payment.

Keywords: Binary lottery procedure; Experimental economics; Risk neutrality (search for similar items in EconPapers)
JEL-codes: C81 C91 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268112001746
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Inducing Risk Neutral Preferences with Binary Lotteries: A Reconsideration (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:94:y:2013:i:c:p:145-159

DOI: 10.1016/j.jebo.2012.09.008

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().