Variation in Risk Seeking Behavior in a Natural Experiment on Large Losses Induced by a Natural Disaster

Lionel Page, David Savage and Benno Torgler

No 130900, Economy and Society from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This study explores people's risk attitudes after having suffered large real-world losses following a natural disaster. Using the margins of the 2011 Australian floods (Brisbane) as a natural experimental setting, we find that homeowners who were victims of the floods and face large losses in property values are 50% more likely to opt for a risky gamble {a scratch card giving a small chance of a large gain ($500,000) {than for a sure amount of comparable value ($10). This finding is consistent with prospect theory predictions of the adoption of a risk-seeking attitude after a loss.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 21
Date: 2012-07
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Citations: View citations in EconPapers (6)

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https://ageconsearch.umn.edu/record/130900/files/NDL2012-054.pdf (application/pdf)

Related works:
Working Paper: Variation in Risk Seeking Behavior in a Natural Experiment on Large Losses Induced by a Natural Disaster (2012)
Working Paper: Variation in risk seeking behavior in a natural experiment on large losses induced by a natural disaster (2012)
Working Paper: Variation in Risk Seeking Behavior in a Natural Experiment on Large Losses Induced by a Natural Disaster (2012)
Working Paper: Variation in Risk Seeking Behavior in a Natural Experiment on Large Losses Induced by a Natural Disaster (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemso:130900

DOI: 10.22004/ag.econ.130900

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