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Attitudes Towards Risk: An Experiment
Author(s) -
Eichberger Jürgen,
Güth Werner,
Müller Wieland
Publication year - 2003
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/1467-999x.00161
Subject(s) - lottery , economics , risk aversion (psychology) , willingness to pay , value (mathematics) , actuarial science , microeconomics , measure (data warehouse) , expected utility hypothesis , financial economics , computer science , mathematics , statistics , database
The evaluations of a repeated lottery with and without the option to sell the second–stage lottery are compared theoretically and experimentally. Comparing individuals’ risk attitudes, we find that risk attitudes differ depending on the measure of risk attitude applied. We also find that subjects show low or no risk aversion, but put very high value on the opportunity to sell the lottery in the second stage of the decision problem. These findings cast doubts on the suitability of the random price mechanism for truthful revelation of willingness to pay in sequential decision problems.