Risk breeds risk aversion
We examine whether exposure to a more or less risky environment affects people’s subsequent risk-taking behavior. In a laboratory setting, all subjects went through twelve rounds of multiple-price-list decisions between a risky alternative and a safe alternative. In the first six rounds, subjects we...
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sg-ntu-dr.10356-1449092023-03-05T15:35:24Z Risk breeds risk aversion He, Tai-Sen Hong, Fuhai School of Social Sciences Social sciences::Economic theory::Microeconomics Risk Aversion Laboratory Experiment We examine whether exposure to a more or less risky environment affects people’s subsequent risk-taking behavior. In a laboratory setting, all subjects went through twelve rounds of multiple-price-list decisions between a risky alternative and a safe alternative. In the first six rounds, subjects were randomly assigned to a high-, moderate-, or low-risk environment, which differed in the variances of the lotteries they were exposed to. In the last six rounds, subjects in all treatments made decisions on an identical set of lotteries. We found that subjects who had experienced a riskier environment exhibited a higher degree of risk aversion. Our experimental design allows us to conclude that this effect is driven by the risk environment per se, rather than the realized outcomes of the risk. This finding has important theoretical and policy implications. Nanyang Technological University Accepted version We thank the editor, two referees, Ian Krajbich, Lionel Page, Joseph Tao-yi Wang, Songfa Zhong, seminar and conference participants in Nanyang Technological University, National Cheng-chi University, National Taiwan University, National Tsing-hua University, and the 12th International Conference of Western Economic Association International for helpful comments. He acknowledges financial support from Nanyang Technological University (HASS Start-up grant). 2020-12-03T02:24:03Z 2020-12-03T02:24:03Z 2017 Journal Article He, T.-S., & Hong, F. (2018). Risk breeds risk aversion. Experimental Economics, 21(4), 815-835. doi:10.1007/s10683-017-9553-0 1386-4157 https://hdl.handle.net/10356/144909 10.1007/s10683-017-9553-0 2-s2.0-85034272802 4 21 815 835 en Experimental Economics © 2017 Economic Science Association. All rights reserved. This paper was published by Springer in Experimental Economics and is made available with permission of Economic Science Association. application/pdf |
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Social sciences::Economic theory::Microeconomics Risk Aversion Laboratory Experiment He, Tai-Sen Hong, Fuhai Risk breeds risk aversion |
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We examine whether exposure to a more or less risky environment affects people’s subsequent risk-taking behavior. In a laboratory setting, all subjects went through twelve rounds of multiple-price-list decisions between a risky alternative and a safe alternative. In the first six rounds, subjects were randomly assigned to a high-, moderate-, or low-risk environment, which differed in the variances of the lotteries they were exposed to. In the last six rounds, subjects in all treatments made decisions on an identical set of lotteries. We found that subjects who had experienced a riskier environment exhibited a higher degree of risk aversion. Our experimental design allows us to conclude that this effect is driven by the risk environment per se, rather than the realized outcomes of the risk. This finding has important theoretical and policy implications. |
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School of Social Sciences He, Tai-Sen Hong, Fuhai |
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He, Tai-Sen Hong, Fuhai |
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He, Tai-Sen |
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Risk breeds risk aversion |
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Risk breeds risk aversion |
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Risk breeds risk aversion |
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Risk breeds risk aversion |
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Risk breeds risk aversion |
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risk breeds risk aversion |
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2020 |
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https://hdl.handle.net/10356/144909 |
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