Assessing Individual Risk Attitudes Using Field Data From Lottery Games

Abstract

Abstract-We use information from the television game show with the highest guaranteed average payoff in the United States, Hoosier Millionaire, to analyze risktaking in a high-stakes experiment. We characterize gambling decisions under alternative assumptions about contestant behavior and preferences, and derive testable restrictions on individual risk attitudes based on this characterization. We then use an extensive sample of gambling decisions to estimate distributions of risk-aversion parameters consistent with the theoretical restrictions and revealed preferences. We find that although most contestants display risk-averse preferences, the extent of the risk aversion implied by our estimates varies substantially with the stakes involved in the different decisions.

Estimating Risk Preferences in the Field

“…For surveys, see Andersen et al (2008), Post et al (2008), and Hartley, Lanot, and Walker (2014). Two exceptions are Fullenkamp, Tenorio, and Battalio (2003), who use data from Hoosier Millionaire, and Hartley, Lanot, and Walker (2014), who use data from Who Wants to be a Millionaire? Like the pioneering studies, many of the subsequent papers work with EU models with CRRA and/or CARA utility (e.g., Fullenkamp, Tenorio, and Battalio 2003;Andersen et al 2008;Deck, Lee, and Reyes 2008;Conte et al 2012;Hartley, Lanot, and Walker 2014).…”

“…Two exceptions are Fullenkamp, Tenorio, and Battalio (2003), who use data from Hoosier Millionaire, and Hartley, Lanot, and Walker (2014), who use data from Who Wants to be a Millionaire? Like the pioneering studies, many of the subsequent papers work with EU models with CRRA and/or CARA utility (e.g., Fullenkamp, Tenorio, and Battalio 2003;Andersen et al 2008;Deck, Lee, and Reyes 2008;Conte et al 2012;Hartley, Lanot, and Walker 2014). Others go beyond EU and consider RDEU, prospect theory, or other non-EU models (e.g., Botti et al 2008;Post et al 2008;Mulino et al 2009;de Roos and Sarafidis 2010;Bombardini and Trebbi 2012).…”

Measuring Risk Attitudes Controlling for Personality Traits

“…Other shows that also provide natural experiments on risk attitudes include Card Sharks (Gertner, 1993), Final Jeopardy! (Metrick, 1995), for Illinois Instant Riches (Hersch and McDougall, 1997), Lingo (Beetsma and Schotman, 2001), Hoosier Millionaire (Fullenkamp, Terino, and Battalio, 2003), and Who Wants To Be A Millionaire (Hartley, Lanet, and Walker, 2005).…”

Double or Nothing!? Small Groups Making Decisions Under Risk in 'Quiz Taxi'

“…Using data from another lottery game show Hoosier Millionairewith high stakes of up to USD 1,000,000, Fullenkamp et al (2003) nd that contestants are risk-averse, but that the degree of risk aversion varies with the stakes.…”