Heterogeneity in Risky Choice Behavior in a Broad Population

TY - JOUR

T1 - Heterogeneity in Risky Choice Behavior in a Broad Population

AU - von Gaudecker, Hans-Martin

AU - van Soest , Arthur

AU - Wengström, Erik Roland

PY - 2011/4

Y1 - 2011/4

N2 - We analyze risk preferences using an experiment with real incentives in a representative sample of 1,422 Dutch respondents. Our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics: utility curvature, loss aversion, preferences toward the timing of uncertainty resolution, and the propensity to choose randomly rather than on the basis of preferences. We find that all f our parameters contribute to explaining choice behavior. The structural parameters are significantly associated with socioeconomic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data.

AB - We analyze risk preferences using an experiment with real incentives in a representative sample of 1,422 Dutch respondents. Our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics: utility curvature, loss aversion, preferences toward the timing of uncertainty resolution, and the propensity to choose randomly rather than on the basis of preferences. We find that all f our parameters contribute to explaining choice behavior. The structural parameters are significantly associated with socioeconomic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data.

U2 - 10.1257/aer.101.2.664

DO - 10.1257/aer.101.2.664

M3 - Journal article

SN - 0002-8282

VL - 101

SP - 664

EP - 694

JO - American Economic Review

JF - American Economic Review

IS - 2

ER -