allowing us the use of the data. We also thank Marco Castillo, James Cox and Vjollca Sadiraj for helpful comments. Suggestions from an anonymous referee and the editor greatly improved the paper. Abstract: We implement a risk experiment that allows for judgment errors to investigate who makes mistakes and whether it matters. The experiments are conducted with a random sample of the adult population in Rwanda, and data on financial decisions are collected. We find a high degree of inconsistent choices, with over 50 % of the participants making at least one mistake. Importantly, errors are informative. While risk aversion alone does not explain financial decisions, risk aversion and inconsistent choices interact in significant and sensible ways. As we would expect, risk-averse individuals are more likely to belong to a savings group and less likely to take out an informal loan. For those more likely to make mistakes, however, as they become more risk averse, they are less likely to belong to a savings group and more likely to take up informal credit, suggesting that mistakes correlate with less than optimal behavior.

Abstract. Economists recognize that preferences can differ across individuals. We examine the strengths and weaknesses of lab and field experiments to detect differences in preferences that are associated with standard, observable characteristics of the individual. We consider preferences over risk and time, two fundamental concepts of economics. Our results provide striking evidence that there are good reasons to conduct field experiments. The lab fails to detect preference heterogeneity that is present in the field, obviously due to the demographic homogeneity of the lab. There are also differences in treatment effects measured in the lab and the field that can be traced to interactions between treatment and demographic effects. These can only be detected and controlled for properly in the field data. Thus one cannot simply claim, without additional empirical argument or assumption, that treatment effects estimated in the lab are reliable.

In this paper, we explore the linkage between two related concepts describing an individual’s attitude towards risk, namely, financial risk tolerance (FRT) and risk aversion. The former is measured from survey data and the latter from data from lottery experiments. Specifically, we follow a two stage process: (1) we obtain FRT scores from a psychometrically-validated survey on a sample of 162 people; and (2) we conduct a battery of lottery choice experiments on the same people. The second stage is primarily distinguished from earlier lottery choice experiments by being online and involving non-student subjects. Moreover, we contrast: real and hypothetical payoffs; low and high stake payoffs; decisions involving gains and losses; and order effects. Our key finding is that the two approaches to analysing decision-making under uncertainty are strongly aligned. We present evidence that this is particularly the case for the female participants in our sample. There is also some evidence that the alignment is strengthened when high stake gambles are employed.

Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. IZA Discussion Paper No. 4022

We report results from the impact evaluation of a randomized educational inter-vention targeted at elementary school children. The program uses case studies, stories and classroom activities to improve the ability to imagine future selves, and emphasizes forward-looking behavior. We find that treated students make more patient intertempo-ral choices in incentivized experimental tasks. The effect is stronger for students who are identified as present-biased in the baseline. Furthermore, using official administrative records, we find that treated children are significantly less likely to receive a low behav-ioral grade. These results are persistent one year after the intervention, replicate well in a different sample, and are robust across different experimental elicitation methods.

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There are two means of changing the expected value of a risk: changing the probability of a reward or changing the reward. Theoretically, the former produces a greater change in expected utility for risk averse agents. This paper uses two formats of a risk preference elicitation mechanism under two decision frames to test this hypothesis. After controlling for decision error, probability weighting, and order effects, subjects, on average, are slightly risk averse and prefer an increase in the expected value of a risk due to increasing the probability over a compensated increase in the reward. There is substantial across-format inconsistency but very little within-format inconsistency at the individual level.

A common mechanism to elicit risk preferences requires a respondent to make a series of dichotomous choices. A recurring problem with this mechanism is a frequently observed tendency to switch from the less to the more risky choice multiple times, multiple switching behavior. We introduce an instructional variation our evidence suggests practically eliminates such behavior. We read a script emphasizing only one decision will determine earnings before providing written instructions. Emphasizing the incentive compatibility of the payment rule reduces observed multiple switching behavior from 13.3 % to 2.3 % in one format and from 25.8 % to 6.7 % in another.

ABSTRACT. The purpose of an experiment is to observe choice in a controlled setting. When subjects are given multiple decisions, however, subjects ’ choices in one decision may be distorted by the choices made in others. Assuming only eventwise monotonicity (dominated gambles are never chosen), we prove that paying for one random problem— the Random Problem Selection (RPS) mechanism—is essentially the only incentive compatible payment mechanism. We also discuss situations where monotonicity may fail, and show that paying for every decision is incentive compatible if and only if a ‘no complementarities at the top ’ (NCaT) condition is assumed.

Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be