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Heterogeneity in Risky Choice Behavior in a Broad Population

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von Gaudecker, Hans-Martin, van Soest, Arthur, Wengström, Erik·2011·American Economic Review

DOI 10.1257/aer.101.2.664

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Abstract

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 four 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. (JEL D12, D81)

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Authors: von Gaudecker, H.-M., van Soest, A., & Wengström, E.
Affiliations: Department of Economics, Universität Mannheim, L7 3-5, 68131 Mannheim, Germany.
Netspar, Tilburg University, P.O. Box 90153, NL-5000 LE Tilburg, Netherlands.
University of Copenhagen (DK)
ORCID: Wengström, Erik
Venue: American Economic Review
Publisher: American Economic Association
Published: 2011-04-01
Volume: 101
Issue: 2
Pages: 664-694
ISSN: 0002-8282 (ISSN-L)
1944-7981
DOI: 10.1257/aer.101.2.664
OpenAlex: W1505758174
Cited by: 349
References: 68
Citations by year: 2026: 18 · 2025: 18 · 2024: 17 · 2023: 26 · 2022: 30 · 2021: 20 · 2020: 29 · 2019: 22 · 2018: 27 · 2017: 30 · 2016: 17 · 2015: 17 · 2014: 25 · 2013: 23 · 2012: 24
FWCI: 13.42
Type: journal article
Language: en
Open access: green
research.tilburguniversity.edu
Licence: other-oa
Locations: American Economic Review (publishedVersion)
Research portal (Tilburg University) (publishedVersion)
RePEc: Research Papers in Economics (submittedVersion)
Data Archiving and Networked Services (DANS) (submittedVersion, other-oa)
Data Archiving and Networked Services (DANS) (submittedVersion)
Lund University Publications (Lund University) (submittedVersion)
Research at the University of Copenhagen (University of Copenhagen) (submittedVersion)
Topics: Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Experimental Behavioral Economics Studies
Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic and Environmental Valuation
Keywords: decision making under risk, risk preferences, preference heterogeneity, loss aversion, utility curvature, random choice, unobserved heterogeneity

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Heterogeneity in Risky Choice Behavior in a Broad Population

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