Risk attitude in case of losses or gains – an experimental study

Tomasz Rólczyński, Maria Forlicz and Łukasz Kuźmiński

The European Journal of Finance, 2017, vol. 23, issue 6, 474-486

Abstract: In order to verify some hypotheses concerning decision-making in risky choice, we conducted two experiments with real payoffs (although nonmonetary). The purpose of the article was answering following questions: does the present status influence behavior in risky choice? Does the difference in scenarios (gain/loss) influence behavior? Are people willing to pay more for insurance than an expected value of a loss (paying for transferring risk)? Is there any relationship between ability to earn and risk attitude? Our experiments show that it is possible that people taking decisions involving risk not always act the way to maximize wealth (in our case points), sometimes they are happy enough when they achieve some level of wealth. We also found that people act in a different way when they know how much is missing to achieve their goal and when they do not. Based on the obtained results, we can also say that most people are risk averse. Even in the gain scenario, people were ready to give back so many points to get the rest for sure, that what remained was less than the expected value. It is possible that there is some relationship between risk attitude and ability to get (earn) wealth in another way than lottery.

Date: 2017
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DOI: 10.1080/1351847X.2015.1062789

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