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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Mendola, Mariapia / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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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:
2008-03-06

Abstract

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

Citing Articles

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[1]
Joseph G. Eisenhauer, Doris Geide-Stevenson, and David L. Ferro
Review of Social Economy, 2011, Volume 69, Number 1, Page 29
[2]
Pavlo R. Blavatskyy
Economics Letters, 2012, Volume 117, Number 3, Page 650
[3]
Fabrizio Botti, Anna Conte, Daniela Di Cagno, and Carlo D’Ippoliti
Research in Economics, 2009, Volume 63, Number 4, Page 282
[4]
Anna Conte, John D. Hey, and Peter G. Moffatt
Journal of Econometrics, 2011, Volume 162, Number 1, Page 79

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