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Cited by 384

The DOI matches its Crossref record; 44 of the 44 references it cites were found in a registry or an index.

Risk and Rationality: Uncovering Heterogeneity in Probability Distortion

·2010·Econometrica
DOI 10.3982/ecta7139
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Abstract

It has long been recognized that there is considerable heterogeneity in individual risk taking behavior, but little is known about the distribution of risk taking types. We present a parsimonious characterization of risk taking behavior by estimating a finite mixture model for three different experimental data sets, two Swiss and one Chinese, over a large number of real gains and losses. We find two major types of individuals: In all three data sets, the choices of roughly 80% of the subjects exhibit significant deviations from linear probability weighting of varying strength, consistent with prospect theory. Twenty percent of the subjects weight probabilities near linearly and behave essentially as expected value maximizers. Moreover, individuals are cleanly assigned to one type with probabilities close to unity. The reliability and robustness of our classification suggest using a mix of preference theories in applied economic modeling.

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Metadata

Venue
Econometrica
Publisher
The Econometric Society
Published
2010
Volume
78
Issue
4
Pages
1375-1412
ISSN
0012-9682 (ISSN-L)
DOI
10.3982/ecta7139
OpenAlex
W3123379619
Cited by
384
References
44
FWCI
12.28
Type
journal article
Language
en
Open access
closed

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CoChat. (2026). Citation check: Risk and Rationality: Uncovering Heterogeneity in Probability Distortion. https://app.cochat.ai/papers/10.3982/ecta7139
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Risk and Rationality: Uncovering Heterogeneity in Probability Distortion. (2010). Econometrica. https://doi.org/10.3982/ecta7139

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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).

Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.