Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study

Abstract

This paper reports measures of preference parameters relating to risk tolerance, time preference, and intertemporal substitution. These measures are based on survey responses to hypothetical situations constructed using an economic theorist's concept of the underlying parameters. The individual measures of preference parameters display heterogeneity. Estimated risk tolerance and the elasticity of intertemporal substitution are essentially uncorrelated across individuals. Measured risk tolerance is positively related to risky behaviors, including smoking, drinking, failing to have insurance, and holding stocks rather than Treasury bills. These relationships are both statistically and quantitatively significant, although measured risk tolerance explains only a small fraction of the variation of the studied behaviors.

Siblings, Not Triplets: Social Preferences for Risk, Inequality and Time in Discounting Climate Change

“…For the median respondent, the midpoint of this range is 0.11, which corresponds to a value of η t of 8.8. This seems to be broadly in line with the results of Barsky et al (1997). They do not report the preferences of the median respondent, but instead report the modal response, which gives a midpoint corresponding to η t =8.7.…”

“…The structure of the questions on intertemporal substitution is also taken from Barsky et al (1997), who asked respondents to choose between different options for allocating consumption before and after retirement. We applied their structure to national borrowing and saving and lengthened the timeframe to 200 years to make the choice situation similar to climate-change policy decisions.…”

“…3 Note the standard welfare model implicitly assumes a perfect correlation. Barsky et al (1997) Taking a large convenience sample of college students in the United States, respondents on time preference are asked to choose between taking lottery winnings as a lump sum or in instalments, while respondents on risk preferences are asked to choose between a certain and risky investment. They too find a relatively weak correlation between their measures of risk aversion and time preference.…”

“…This makes the results particularly relevant for the analysis of climate change. The structure of the questions borrows from Barsky et al (1997), but the framing is modified to measure aversion to societal rather than individual risk.…”

Risk Aversion, Negotiation, and Claims Settlement Strategies

“…Evidence suggests that women are more risk averse than men (see, for example, Levin, Snyder, and Chapman (1988), Powell and Ansic (1997), Jiankoplos and Bernasek (1998), Sunden andSurette (1998), Schubert (1999), and Haleck and Eisenhauer (2001)). Riley and Chow (1992), Zuckerman (1994) and Barsky et al (1997) provide evidence of age-related risk aversion differences as well. It is well-known that risk averse individuals are willing to pay more for insurance (see, for example, Harrington and Niehaus, 2004), but our study is the first to examine how individual risk preferences affect claiming behavior.…”