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Heterogeneity in Risky Choice Behaviour in a Broad Population

Hans-Martin von Gaudecker (), Arthur van Soest () and Erik Wengström ()

No 4022, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyse risk preferences using an experiment with real incentives in a representative sample of 1,422 Dutch respondents. Our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics: Utility curvature, loss aversion, preferences towards the timing of uncertainty resolution, and the propensity to choose randomly rather than on the basis of preferences. We find that all four parameters contribute to explaining choice behaviour. The structural parameters are significantly associated with socio-economic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data.

Keywords: uncertainty resolution; loss aversion; risk aversion; field experiments (search for similar items in EconPapers)
JEL-codes: C90 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
Date: 2009-02
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Published in: American Economic Review, 2011, 101 (2), 664-694

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Journal Article: Heterogeneity in Risky Choice Behavior in a Broad Population (2011) Downloads
Working Paper: Heterogeneity in Risky Choice Behavior in a Broad Population (2009) Downloads
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