American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Heterogeneity in Risky Choice Behavior in a Broad Population
American Economic Review
vol. 101,
no. 2, April 2011
(pp. 664–94)
Abstract
We analyze 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 toward 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 behavior. The structural parameters are significantly associated with socioeconomic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data. (JEL D12, D81)Citation
von Gaudecker, Hans-Martin, Arthur van Soest, and Erik Wengstrom. 2011. "Heterogeneity in Risky Choice Behavior in a Broad Population." American Economic Review, 101 (2): 664–94. DOI: 10.1257/aer.101.2.664Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D81 Criteria for Decision-Making under Risk and Uncertainty