On the change of risk aversion in wealth: a field experiment in a closed economic system

Tobias Huber, Johannes G. Jaspersen (), Andreas Richter and Dennis Strümpel
Additional contact information
Tobias Huber: LMU Munich
Johannes G. Jaspersen: LMU Munich
Andreas Richter: LMU Munich
Dennis Strümpel: LMU Munich

Experimental Economics, 2023, vol. 26, issue 1, No 1, 26 pages

Abstract: Abstract How does risk aversion change in wealth? To answer this question, we implemented a field experiment in the form of a free-to-play mobile game. Players made lottery choices at various points in the game and at different levels of in-game wealth. Since the game was designed as a closed economic system, that is, wealth could not be transferred into or out of the game, only in-game wealth was relevant for players’ choices. Analyzing the choices of over 2000 players, we find evidence for decreasing absolute risk aversion and decreasing relative risk aversion. We also find evidence of an “always safe” heuristic in a subgroup of decisions and observe a tendency of players to act according to the “hot hand fallacy”. Our research design allows us to exclude inertia and lets us analyze lottery stakes of significant size relative to in-game wealth. Our results render implications for theoretical research, empirical studies, and for the optimal design of financial products.

Keywords: Risk preferences; Field experiment; Heuristic behavior; Hot hand fallacy; D01; D81; I12 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10683-022-09762-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:kap:expeco:v:26:y:2023:i:1:d:10.1007_s10683-022-09762-x

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/10683/PS2

DOI: 10.1007/s10683-022-09762-x

Access Statistics for this article

Experimental Economics is currently edited by David J. Cooper, Lata Gangadharan and Charles N. Noussair

More articles in Experimental Economics from Springer, Economic Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().