Risk Aversion and Incentive Effects: New Data without Order Effects

Holt, Charles A.; Laury, Susan K.

doi:10.1257/0002828054201459

Cited by 324 publications

(215 citation statements)

References 4 publications

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“…We know surprisingly little about the impact of cognitive and behavioral determinants in order-statistic and stag-hunt games. Even elementary behavioral determinants such as the effects of risk attitudes have hardly been studied directly (see Heinemann et al, 2004a, for an important and intriguing exception) although their potential impact has been indirectly acknowledged by some researchers analyzing stag-hunt games (e.g., the laudable but problematic early attempts by CDFR 1990CDFR , 1992 to control for risk preferences through the Roth -Malouf procedure in the stag hunt game) and demonstrated by a recent study by Holt and Laury (2002;see also Harrison et al, 2005;Holt & Laury, 2005). Surprisingly, the impact of group composition along dimensions such as cultural homogeneity remains also a blind spot (see Dufwenberg and Gneezy, 2005, for an isolated exception).…”

Section: Resultsmentioning

confidence: 99%

When and why? A critical survey on coordination failure in the laboratory

2007

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Coordination games with Pareto-ranked equilibria have attracted major theoretical attention over the past two decades. Two early path-breaking sets of experimental studies were widely interpreted as suggesting that coordination failure is a common phenomenon in the laboratory. We identify the major determinants that seem to affect the incidence, and/or emergence, of coordination failure in the lab and review critically the existing experimental studies on coordination games with Pareto-ranked equilibria since that early evidence emerged. We conclude that coordination failure is likely to be the exception rather than the rule, both in the lab and outside of it.

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Section: Resultsmentioning

confidence: 99%

When and why? A critical survey on coordination failure in the laboratory

2007

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“…Its best feature is that it accounts for the observation that human choosers are averse to risks, and it accomplishes this in a very subtle and elegant way. A bad feature is that it does this on very ad hoc grounds, and his selection of the logarithmic function as a way to describe all existing human choosers seems not particularly well supported by our available data (Holt & Laury, 2005;Wu & Gonzalez, 1999). Still, these general notions of EV and expected utility form the core of many analyses of choice and served as motivating ideas in the neoclassical economic revolution of the 20th century.…”

Section: Bernoulli's Moral Value (Classical Expected Utility)mentioning

confidence: 93%

Understanding risk: A guide for the perplexed

Glimcher

2008

Cognitive, Affective, & Behavioral Neuroscience

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“…Moreover, we faced a trade-off between the simultaneous needs of making the monetary outcomes salient, and diversifying the range of monetary stakes in the attempt to capture possible cases of risk preference depending on the absolute value of the monetary stakes (for instance, being risk averse for low amounts, but risk loving for high amounts, or the other way around: Hey and Orme, 1994;Harrison et al, 2005a;Holt and Laury, 2005;Cox and Sadiraj, 2006;Cox et al, 2015). Due to the binding time constraint, we opted for two MPL series of HL questions with the following prize sets: [A1: £40 and £32; B1: £77 and £2], [A2: £100 and £40; B2: £180 and £2].…”

Section: Experimental Design Considerationsmentioning

confidence: 99%

Temporal Stability, Cross-Validity, and External Validity of Risk Preferences Measures: Experimental Evidence from a UK Representative Sample

2016

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We conduct an "artefactual" field experiment to incorporate three different risk preferences measures within the Innovation Panel (IP) of the UK Household Longitudinal Survey (UKHLS). We randomly allocate to an experimental module a nationally representative sample of 661 adult respondents to the IP Wave 6 (IP6). These subjects respond to the incentive-compatible tasks by Holt and Laury (2002) (HL), and by Binswanger (1980Binswanger ( , 1981 and Eckel and Grossman (2008) (B-EG), and to the SOEP survey questions by Dohmen et al. (2011) for self-reported willingness to take risks in general (SOEP-G), in finance (SOEP-F), and in health (SOEP-H). One year later (IP7) the same measures are repeated for 413 of these respondents. This design allows us to systematically test, for a UK representative sample, the validity of the three measures along three dimensions. First, we look at cross-validity by testing how responses at one point in time correlate across the three tasks, assuming a Constant Relative Risk Aversion (CRRA) utility function. Second, we look at temporal stability by comparing the responses across IP6 and IP7. Third, we look at external validity by considering a range of risky health and financial behaviors in the UKHLS. We have three main findings. First, concerning cross-validity, we find evidence that the different measures generally correlate and map into each other, although their associations are not perfect. Second, concerning temporal stability, there are significant and positive correlations of the B-EG, HL, and SOEP measures across IP6 and IP7. Finally, we find mixed evidence concerning external validity.

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Risk Aversion and Incentive Effects: New Data without Order Effects

Cited by 324 publications

References 4 publications

When and why? A critical survey on coordination failure in the laboratory

When and why? A critical survey on coordination failure in the laboratory

Understanding risk: A guide for the perplexed

Temporal Stability, Cross-Validity, and External Validity of Risk Preferences Measures: Experimental Evidence from a UK Representative Sample

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