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Publication Details
AFRICAN RESEARCH NEXUS
SHINING A SPOTLIGHT ON AFRICAN RESEARCH
arts and humanities
Risk aversion elicitation: Reconciling tractability and bias minimization
Theory and Decision, Volume 71, No. 1, Year 2011
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Description
Risk attitude is known to be a key determinant of various economic and financial choices. Behavioral studies that aim to evaluate the role of risk attitudes in contexts of this type, therefore, require tools for measuring individual risk tolerance. Recent developments in decision theory provide such tools. However, the methods available can be time consuming. As a result, some practitioners might have an incentive to prefer "fast and frugal" methods to clean but more costly methods. In this article, we focus on a tractable procedure initially proposed by Holt and Laury (2002) to elicit risk attitude. We generalize this method to measure utility and risk aversion as follows. First, we allow measurement of probabilistic risk attitude through violations of expected utility due to probability weighting. Second, we use the outcome scale rather than the probability scale in the menu of choices. Third, we compare sure payoffs with lotteries instead of comparing non-degenerate lotteries. A within-subject experimental study illustrates the gains in tractability and bias minimization that can result from such an extension. © 2010 Springer Science+Business Media, LLC.
Authors & Co-Authors
Abdellaoui, Mohammed
France, Jouy-en-josas
Groupement de Recherche et D'etudes en Gestion D'hec
France, Paris
Cnrs Centre National de la Recherche Scientifique
Driouchi, Ahmed
Morocco, Ifrane
Al Akhawayn University
L'Haridon, Olivier
France, Jouy-en-josas
Groupement de Recherche et D'etudes en Gestion D'hec
France, Paris
Sorbonne Université
Statistics
Citations: 88
Authors: 3
Affiliations: 4
Identifiers
Doi:
10.1007/s11238-009-9192-9
ISSN:
00405833
e-ISSN:
15737187