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Active and Passive Risk-Taking

Christian König-Kersting (), Johannes Lohse and Anna Louisa Merkel ()

Working Papers from Faculty of Economics and Statistics, University of Innsbruck

Abstract: Does risk-taking depend on whether risks result from an action (active risk-taking) or from not taking action (passive risk-taking)? Economic studies of risk mostly focus on active risk-taking, even though in many everyday decisions, risks result from remaining passive. It is unclear whether studying active risk-taking is informative for situations where risks result from passivity, considering theoretical arguments that suggest otherwise. We develop a new experimental risk-elicitation procedure, which we call the Lottery Adjustment Task (LAT) and employ it in two separate experiments to study the size and direction of potential mode-of-choice effects (i.e. differences in risk-taking between active and passive decision modes). While our tightly controlled lab study provides little evidence for the existence of mode-of-choice effects when attention costs are absent, we find substantial evidence for mode-of-choice-effects in an online setting where decisions are spread out over 10 days and attention costs are thus a key feature of the decision.

Keywords: risk-taking; mode-of-choice; status quo effect; omission bias (search for similar items in EconPapers)
JEL-codes: D81 D91 C91 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2020-04
New Economics Papers: this item is included in nep-exp and nep-ore
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