How Do Beliefs about Skill Affect Risky Decisions?

Adrian Bruhin, Luis Santos-Pinto () and David Staubli

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: Beliefs about relative skill matter for risky decisions such as career choices, market entry, and financial investments. Yet in most laboratory experiments risk is exogenously given and beliefs about relative skill play no role. We use a laboratory experiment free of strategy confounds to isolate the impact of beliefs about relative skill on risky choices. We find that low (high) skill individuals are more (less) willing to take risks on gambles with probabilities depending on relative skill than on gambles with exogenously given probabilities. Additionally, the correlation between stated and revealed beliefs -- beliefs estimated from choices -- is only moderate, suggesting that relying exclusively on stated beliefs may be misleading.

Keywords: Individual risk taking behavior; Self-confidence; Laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Pages: 44 pp.
Date: 2016-10
New Economics Papers: this item is included in nep-cbe
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: How do beliefs about skill affect risky decisions? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:16.20

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