Risk Attitudes of Children and Adults: Choices Over Small and Large Probability Gains and Losses

William Harbaugh (wtharbaugh@gmail.com), Kate Krause (kkrause@unm.edu) and Lise Vesterlund

Experimental Economics, 2002, vol. 5, issue 1, 53-84

Abstract: In this paper we examine how risk attitudes change with age. We present participants from age 5 to 64 with choices between simple gambles and the expected value of the gambles. The gambles are over both gains and losses, and vary in the probability of the non-zero payoff. Surprisingly, we find that many participants are risk seeking when faced with high-probability prospects over gains and risk averse when faced with small-probability prospects. Over losses we find the exact opposite. Children's choices are consistent with the underweighting of low-probability events and the overweighting of high-probability ones. This tendency diminishes with age, and on average adults appear to use the objective probability when evaluating risky prospects. Copyright Kluwer Academic Publishers 2002

Keywords: probability weighting; subjective expected utility; prospect theory; children; risk (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (183)

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Related works:
Working Paper: Risk attitudes of children and adults: Choices over small and large probability gains and losses (2002)
Working Paper: Risk attitudes of children and adults: choices over small and large probability gains and losses (1999)
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DOI: 10.1023/A:1016316725855

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