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The B.E. Journal of Economic Analysis & Policy

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Risk Attitude in Real Decision Problems

Fabrizio Botti1 / Anna Conte2 / Daniela Teresa Di Cagno3 / Carlo D'Ippoliti4

1LUISS Guido Carli Rome,

2University of Rome I “La Sapienza”, University of Rome II “Tor Vergata” and LUISS Guido Carli Rome,

3LUISS Guido Carli Rome,

4University of Rome I “La Sapienza” and LUISS Guido Carli Rome,

Citation Information: The B.E. Journal of Economic Analysis & Policy. Volume 8, Issue 1, ISSN (Online) 1935-1682, DOI: 10.2202/1935-1682.1798, March 2008

Publication History

Published Online:


We use data from 298 showings of the television program "Affari Tuoi," which involves contestants making decisions between risky prospects with possible prizes of up to half a million euros, to estimate three models of decision-making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. We find that Regret-Rejoice does not significantly improve upon Expected Utility, while Rank-Dependent outperforms it. Interestingly, we find that the CARA specification fits significantly better than the conventionally-adopted CRRA specification. Crucially, we find a significant role for unobserved heterogeneity, implying that our estimates provide more superior estimates of risk attitude and of probability weighting than other studies.

Keywords: field experiments; risk attitude; unobserved heterogeneity

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