The Formation of Risk Preferences through Small-Scale Events

Silvia Angerer (), E. Dutcher, Daniela Glätzle-Rützler, Philipp Lergetporer () and Matthias Sutter
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Philipp Lergetporer: Technical University of Munich

No 14679, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Large, macroeconomic shocks in the past have been shown to influence economic decisions in the present. We study in an experiment with 743 subjects whether small-scale, seemingly negligible, events also affect the formation of risk preferences. In line with a reinforcement learning model, we find that subjects who won a random lottery took significantly more risk in a second lottery almost a year later. The same pattern emerges in another experiment with 136 subjects where the second lottery was played more than three years after the first lottery. So, small-scale, random, events affect the formation of risk preferences significantly.

Keywords: preference formation; risk preferences; reinforcement learning; experiment (search for similar items in EconPapers)
JEL-codes: C91 D01 D83 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2021-08
New Economics Papers: this item is included in nep-exp and nep-isf
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Related works:
Working Paper: The formation of risk preferences through small-scale events (2021)
Working Paper: The Formation of Risk Preferences through Small-Scale Events (2021)
Working Paper: The formation of risk preferences through small-scale events (2021)
Working Paper: The Formation of Risk Preferences Through Small-Scale Events (2021)
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