The Changes of Risk Attitude Under Incentive Effect

Abstract

This paper aims to focus on the changes of behaviors and risk attitudes of human in positive and negative domain of different scales under hypothetical and real conditions, and the effects of payment or charge method. In addition, how does the mixed effect of incentive effect and other potential factors affect attitudes of human towards risk will also be studied. The main method is to study and summarize the existing experiments: preliminary experiment and improved version of Holt & Laury, experiment of monetary incentives in the loss domain and behavior toward risk of Etchart-Vincent and l'Haridon and experiment considering other latent elements of Camerea and Hogarth. After a critical review of these existing experiments and their findings on this topic, we come to a conclusion that, consistent with prospect theory, risk aversion grows at decreasing speed as income increases in real condition, while there is no change in hypothetical condition; confronting with loss, people are always instinctively reducing losses, whether in real or virtual situations; potential elements such as intrinsic motivation and cognitive capital will also influence decisions. This paper is of great significance in objectively evaluating the advantages and disadvantages of existing key experiments, and providing a direction for future experimentalimprovement. In the future, there will be more faultless experiments, and the prospect theory will also be consummated.