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SSRN Electronic Journal, 2009

DOI: 10.2139/ssrn.1351186

American Economic Association, American Economic Review, 2(101), p. 664-694

DOI: 10.1257/aer.101.2.664

SSRN Electronic Journal

DOI: 10.2139/ssrn.1344950

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Heterogeneity in Risky Choice Behaviour in a Broad Population

Journal article published in 2009 by Hans-Martin von Gaudecker, Arthur H. O. van Soest, Erik Roland Wengström
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This paper is available in a repository.

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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)