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Payoffs, Probabilities, and Preferences: Relative Risk Aversion Across Treatments of Multiple Payoff Structures.
Turscak, Andrew L
Turscak, Andrew L
Abstract
We conducted a study to examine whether cost-saving practices in human behavior experiments elicit realistic decisions. Subjects participated in three lottery choice treatments modeled after Holt and Laury’s 2002 design. Each treatment had varying financial incentives, and a coefficient of relative risk aversion was assigned for the decisions made in each treatment. The experiment was paired with a follow-up survey that included demographic questions and questions pertaining to a subject’s engagement in risky behaviors. The study found statistically significant increases in risk-aversion with increases in the scale of payoffs. None of the risky behaviors on the survey predicted risk-loving behavior in the experiment. The study did find, however, that self-financing college predicted risk-averse behavior in two of the three treatments.
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2015-04-01
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Economics