Economics at your fingertips  

Detecting heterogeneous risk attitudes with mixed gambles

Luis Santos-Pinto (), Adrian Bruhin (), José Mata () and Thomas Astebro ()

Theory and Decision, 2015, vol. 79, issue 4, 573-600

Abstract: We propose a task for eliciting attitudes toward risk that is close to real-world risky decisions which typically involve gains and losses. The task consists of accepting or rejecting gambles that provide a gain with probability $$p$$ p and a loss with probability $$1-p$$ 1 - p . We employ finite mixture models to uncover heterogeneity in risk preferences and find that (i) behavior is heterogeneous, with one half of the subjects behaving as expected utility maximizers, (ii) for the others, reference-dependent models perform better than those where subjects derive utility from final outcomes, (iii) models with sign-dependent decision weights perform better than those without, and (iv) there is no evidence for loss aversion. The procedure is sufficiently simple so that it can be easily used in field or lab experiments where risk elicitation is not the main experiment. Copyright Springer Science+Business Media New York 2015

Keywords: Individual risk-taking behavior; Latent heterogeneity; Finite mixture models; Reference-dependence; Loss aversion; C91; D81 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Detecting Heterogeneous Risk Attitudes with Mixed Gambles (2014) Downloads
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:

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11238/PS2

DOI: 10.1007/s11238-015-9484-1

Access Statistics for this article

Theory and Decision is currently edited by Mohammed Abdellaoui

More articles in Theory and Decision from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2022-05-17
Handle: RePEc:kap:theord:v:79:y:2015:i:4:p:573-600