On the Robustness of Higher Order Risk Preferences

Cary Deck () and Harris Schlesinger

Working Papers from Chapman University, Economic Science Institute

Abstract: Economists have begun to recognize the role that higher order risk preferences play in a variety of settings. As such, several experiments have documented the degree of prudence, temperance, and to a lesser extent, edginess and bentness that laboratory subjects exhibit. More recently, researchers have argued that higher order risk preferences generally conform to mixed risk averse and mixed risk loving patterns that arise from a preference for disaggregating or aggregating harms, respectively. This paper examines the robustness of this pattern in three ways. First, it attempts to directly replicate previous results with compound lotteries over monetary outcomes. Second, it compares behavior in compound lotteries with behavior in reduced form lotteries. And third, it evaluates choices over monetary and non-monetary risks. While previous results are replicated for compound lotteries over monetary outcomes and aggregate behavior with reduced form lotteries has a similar pattern, individuals clearly treat compound and reduced form lotteries differently. Further, behavior differs between monetary and non-monetary outcomes.

Keywords: Risk apportionment; mixed risk aversion; prudence; temperance; edginess; experiments (search for similar items in EconPapers)
JEL-codes: C9 D8 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cbe and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.chapman.edu/research-and-institutions/e ... r-Risk-Attitudes.pdf

Related works:
Journal Article: ON THE ROBUSTNESS OF HIGHER ORDER RISK PREFERENCES (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:16-26

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