Risk attitude elicitation using a multi-lottery choice task: Real vs. hypothetical incentives

We present a bi-dimensional multi lottery choice task which can be used in order to elicit the agents' risk attitudes in financial environments. This task is implemented both with hypothetical and real monetary incentives in a between-subjects and a within-subjects experiment. We observe choice...

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Bibliographic Details
Published in:Revista española de financiación y contabilidad 2011-01, Vol.40 (152), p.613-628
Main Authors: Barreda-Tarrazona, Iván, Jaramillo-Gutiérrez, Ainhoa, Navarro-Martínez, Daniel, Sabater-Grande, Gerardo
Format: Article
Language:English
Subjects:
Economía experimental
Experimental economics
Hypothetical bias
multi-lotería
Multi-lottery choice task
Sesgo hipotético
Tarea de elección
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Summary:We present a bi-dimensional multi lottery choice task which can be used in order to elicit the agents' risk attitudes in financial environments. This task is implemented both with hypothetical and real monetary incentives in a between-subjects and a within-subjects experiment. We observe choices involving significantly lower risk aversion on aggregate when incentives are real. The differences grow with the stakes at play. We also obtain significant differences between hypothetical and real rewards in both utility weighting and probability weighting estimated parameters. We find that the use of hypothetical incentives in multi-lottery choice tasks for evaluating individual risk aversion can be misleading.
ISSN:0210-2412
2332-0753
DOI:10.1080/02102412.2011.10779713