Risky Choice in the Limelight

Guido Baltussen, Martijn J. van den Assem and Dennie van Dolder
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Guido Baltussen: Erasmus University Rotterdam
Martijn J. van den Assem: VU University Amsterdam

The Review of Economics and Statistics, 2016, vol. 98, issue 2, 318-332

Abstract: This paper examines how risk behavior in the limelight differs from that in anonymity. In two separate experiments, we find that subjects are more risk averse in the limelight. However, risky choices are similarly path dependent in the different treatments. Under both limelight and anonymous laboratory conditions, a simple prospect theory model with a path-dependent reference point provides a better explanation for subjects’ behavior than a flexible specification of expected utility theory. In addition, our findings suggest that ambiguity aversion depends on being in the limelight, that passive experience has little effect on risk taking, and that reference points are determined by imperfectly updated expectations.

Keywords: decision making under risk; risky choice; risk preferences; risk aversion; ambiguity aversion; limelight; accountability; public scrutiny; experience; game show; natural experiment; laboratory experiment; expected utility theory; prospect theory (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (16)

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