Risk and Time Preferences: Experimental and Household Survey Data from Vietnam

Tanaka, Tomomi; Camerer, Colin F.; Nguyen, Quang

doi:10.2139/ssrn.877229

Cited by 54 publications

(94 citation statements)

References 43 publications

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“…There is already some evidence that hungry people make financial decisions differently from sated people (34)(35)(36). And it is widely acknowledged that poor people make different decisions about whether to accept a particular risk than do their more wealthy peers (37)(38)(39). In our data, the richer monkeys become, the less risk averse they become, even in relative terms, consistent with decreasing relative risk aversion with increasing wealth.…”

Section: Discussionsupporting

confidence: 70%

Thirst-dependent risk preferences in monkeys identify a primitive form of wealth

Yamada

Tymula

Louie

et al. 2013

Proc. Natl. Acad. Sci. U.S.A.

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Experimental economic techniques have been widely used to evaluate human risk attitudes, but how these measured attitudes relate to overall individual wealth levels is unclear. Previous noneconomic work has addressed this uncertainty in animals by asking the following: (i) Do our close evolutionary relatives share both our risk attitudes and our degree of economic rationality? And (ii) how does the amount of food or water one holds (a nonpecuniary form of "wealth") alter risk attitudes in these choosers? Unfortunately, existing noneconomic studies have provided conflicting insights from an economic point of view. We therefore used standard techniques from human experimental economics to measure monkey risk attitudes for water rewards as a function of blood osmolality (an objective measure of how much water the subjects possess). Early in training, monkeys behaved randomly, consistently violating first-order stochastic dominance and monotonicity. After training, they behaved like human choosers-technically consistent in their choices and weakly risk averse (i.e., risk averse or risk neutral on average)-suggesting that well-trained monkeys can serve as a model for human choice behavior. As with attitudes about money in humans, these risk attitudes were strongly wealth dependent; as the animals became "poorer," risk aversion increased, a finding incompatible with some models of wealth and risk in human decision making. utility | satietyWhat We Know About Humans. Significant headway has been made toward understanding human choice behavior under risk. At a theoretical level, any logically consistent chooser behaves as if he consults a continuous monotonic internal representation of utility. Choice is then the process of maximizing utility (see ref.1 for a review). At an empirical level, consistent human choosers are typically somewhat risk averse, maximizing a weakly compressive utility function. Logically inconsistent choosers do not reflect such a maximization process (2-5), in principle.Less headway has been made in understanding how wealth level affects risk attitudes. Although a consensus view is that choosers should become less risk averse as wealth levels increase (6-8), solid empirical data have been difficult to obtain because wealth levels are hard to systematically manipulate in humans.What We Know About Animals. The risk attitudes of many species have been assessed, both with and without confirmation that choosers are logically consistent (9-11), with variable and sometimes controversial results (12). Caraco and colleagues (13), for example, found that sparrows were risk averse over food choices in a manner similar to that of humans, but that this depended on how many calories the subjects had already stored internally-a form of primitive consumption-related "wealth" shared by all animals and premonetary humans. When the birds were heavily food deprived (low caloric stores for future consumption or wealth), they became risk seeking. However, later studies in starlings challenged this conclusion, suggestin...

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Section: Discussionsupporting

confidence: 70%

Thirst-dependent risk preferences in monkeys identify a primitive form of wealth

Yamada

Tymula

Louie

et al. 2013

Proc. Natl. Acad. Sci. U.S.A.

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“…Some find poor people are more risk-averse (Fafchamps & Pender 1997, Nielsen 2001; some find wealthier are more risk-averse (Wik & Holden 1998, Yesuf & Bluffstone 2008; others find little relationship between risk attitudes and wealth, e.g., Binswanger (1981) or Mosley & Verschoor (2005). Using the instrumental variable approach, Tanaka, Camerer & Nguyen (2010) suggest that risk aversion and impatience may lead to poverty.…”

Section: The Role Of Economic Conditions and Cultural Factorsmentioning

confidence: 99%

Prospect Theory Around the World

2011

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We present results from the first large-scale international survey on risk preferences, conducted in 45 countries. We show substantial cross-country differences in risk aversion, loss aversion and probability weighting. Moreover, risk attitudes in our sample depend not only on economic conditions, but also on cultural factors, as measured by the Hofstede dimensions Individuality and Uncertainty Avoidance. The presented data might also serve as an interesting starting point for further research in cultural economics.

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“…Recent contributions include Harrison, Lau and Williams (2002) ;Harrison, Lau, Rutstrom and Williams (2005); Andersen, Harrison, Lau and Rutstrom (2008) ;Benhabib, Bisin and Schotter (2007) ;Tanaka, Camerer and Nguyen (2009).…”

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confidence: 99%

Estimating Time Preferences from Convex Budgets

Andreoni

Sprenger

2012

American Economic Review

499

131

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Experimentally elicited discount rates are frequently higher than what one would infer from market interest rates and seem unreasonable for economic decision-making. Such high rates have often been attributed to dynamic inconsistency, as in present bias and hyperbolic discounting. A commonly recognized bias of standard elicitation techniques is the use of linear preferences for identification. We present a novel methodology for identifying time preferences, both discounting and utility function curvature, from simple allocation decisions. We estimate annual discount rates substantially lower than normally obtained, and limited though significant utility function curvature. Additionally, our data show no evidence of dynamic inconsistency.JEL classification: D81, D90

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Risk and Time Preferences: Experimental and Household Survey Data from Vietnam

Cited by 54 publications

References 43 publications

Thirst-dependent risk preferences in monkeys identify a primitive form of wealth

Thirst-dependent risk preferences in monkeys identify a primitive form of wealth

Prospect Theory Around the World

Estimating Time Preferences from Convex Budgets

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