Stability of risk preference parameter estimates within the Becker-DeGroot-Marschak procedure

Duncan James

Experimental Economics, 2007, vol. 10, issue 2, 123-141

Abstract: This paper reports new data from both selling and buying versions of the Becker-DeGroot-Marschak (BDM) procedure. First, when using the selling version of BDM, the cross-sectional mean of CRRA risk preference parameter estimates shifts from a value consistent with “as if” risk-seeking behavior in the early baseline to a value closer to “as if” risk neutrality in the late baseline. Second, when using the buying version of BDM, the cross-sectional mean of CRRA risk preference parameter estimates does not appear to change over time in a statistically significant manner. The cross-sectional mean from the late baseline of the buying version of BDM is closer to “as if” risk neutrality and to the late baseline estimates from the selling version of BDM than it is to either early baseline estimates from the selling version of BDM or typical estimates from the first price auction. Use of dominated offers is correlated with deviations from “as if” risk neutrality; this suggests the possibility that the early deviations from “as if” risk neutrality reflect errors. Copyright Economic Science Association 2007

Keywords: Risk; Expected utility; Learning (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (17)

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DOI: 10.1007/s10683-006-9136-y

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