Measuring individual risk-attitudes: an experimental comparison between Holt & Laury measure and an insurance-choices-based procedure

Anne Corcos (), François Pannequin and Claude Montmarquette
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Anne Corcos: CURAPP-ESS UMR 7319; CNRS; Université de Picardie

No 2017-79, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper compares the Holt and Laury’s risk attitude elicitation with a risk attitude classification associated with insurance behavior. The standard Holt and Laury’s procedure (2002) is implemented in the loss domain, while the second tool is based on contextualized experimental hedging choices for insurance and loss reduction (secondary prevention). Our findings highlight the high consistency between the two procedures for more than two-thirds of the subjects, both measures leading to the same risk-attitude assignment. Interestingly, cases where the two measures do not coincide concern the only subjects whose Holt and Laury’s risk aversion coefficient is borderline. For these participants, using both measures allows for a more accurate assessment. Finally, the HL-irrational behavior of participants uncovers specific risk-averse behavior signature, while contextualized-irrational behavior reveals a risk-loving behavior.

Keywords: risk-attitude classification; insurance demand; self-insurance demand; loss reduction; secondary prevention; multiple price list method; experimental study (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2017-12-01
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-ias, nep-rmg and nep-upt
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