Risk attitudes of children and adults: choices over small and large probability gains and losses

William Harbaugh (), Kate Krause () and Lise Vesterlund

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

Abstract: In this paper we examine how risk attitudes change with age. We present participants from age 5 to 64 with choices between simple gambles and the expected value of the gambles. The gambles are over both gains and losses, and vary in the probability of the non-zero payoff. Surprisingly, we find that many participants are risk seeking when faced with high-probability prospects over gains and risk averse when faced with small-probability prospects. Over losses we find the exact opposite. Children’s choices are consistent with the underweighting of low-probability events and the overweighting of high-probability ones. This tendency diminishes with age, and on average adults appear to use the objective probability when evaluating risky prospects.

Pages: 25
Date: 1999-01-01
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http://economics.uoregon.edu/papers/UO-1999-2_Harbaugh_Risk_Children.pdf (application/pdf)

Related works:
Journal Article: Risk Attitudes of Children and Adults: Choices Over Small and Large Probability Gains and Losses (2002)
Working Paper: Risk attitudes of children and adults: Choices over small and large probability gains and losses (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ore:uoecwp:1999-2

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