We examine the stability of risk preference within subjects by comparing measures obtained from two elicitation methods, an economics experiment with real monetary rewards and a survey with questions on hypothetical gambles. The survey questions have been validated by numerous empirical studies of investment, insurance demand, smoking and alcohol use, and recent studies have shown the experimental measure is associated with several real-world risky behaviors. For the majority of subjects, we find that risk preferences are not stable across elicitation methods. In interval regression models, subjects ’ risk preference classifications from survey questions on job-based gambles are not associated with risk preference estimates from the experiment. However, we find that risk classifications from inheritance-based gambles are significantly associated with the experimental measure. We identify some subjects for whom risk preference estimates are more strongly correlated across elicitation methods, suggesting that unobserved subject traits like comprehension or effort influence risk preference stability.

We compare three different elicitation methods for measuring risk attitudes of French farmers in a field experiment setting. We consider two experiments based on the lottery choices initially proposed by Holt and Laury (2002) and by Eckel and Grossman (2002,2008), a risk-taking psychological questionnaire and a self-reporting of perceived risk attitudes for different domains. The main empirical results from this within-subject study are the following. First, within the class of lottery choices, risk preference measures are affected by the type of mechanism used. In particular, farmers appear to be more risk averse using the Eckel and Grossman lottery than using the Holt and Laury one. However attitudes towards risk are significantly correlated across lotteries which means that the ranking of risk preferences seems to be preserved. Second, risk preferences appear to be context-dependent. French farmers are highly risk averse for decisions belonging to financial and ethical domains. They report a higher willingness to take risk for professional decisions. Lastly, using the psychological questionnaire, we find that the risk attitude elicited through lottery choices often correlates with risk attitude toward investments. These findings contribute to the literature which addresses the stability of risk preferences across elicitation methods.

ABSTRACT: In the past decade, it has become increasingly common to use simple laboratory games and decision tasks as a device for measuring both the preferences and understanding of rural populations in the developing world. In this paper, we report the results observed with three distinct risk elicitation mechanisms, using samples drawn from the rural population in Senegal, West Africa. We test the understanding of and the level of meaningful responses to the typical Holt-Laury task, to an adaptation of a simple binary mechanism pioneered by Gneezy and Potters in 1997, and to a non-incentivized willingness-to-risk scale. We find a low level of understanding with the Holt-Laury task and an unlikely-to-be-accurate pattern with the willingness-to-risk question. Our analysis indicates that the simple binary mechanism has substantially more predictive power than does the Holt-Laury mechanism. Our study is a cautionary note regarding utilizing either relatively sophisticated risk-elicitation mechanisms or non-incentivized questions in the rural developing world.

This paper compares two prominent empirical measures of individual risk attitudes — | the Holt and Laury (2002) lottery-choice task and the multi-item questionnaire advocated by Dohmen, Falk, Huffman, Schupp, Sunde and Wagner (2011) — | with respect to (a) their within-subject stability over time (one year) and (b) their correlation with actual risk-taking behaviour in the lab | — here the amount sent in a trust game (Berg, Dickaut, McCabe, 1995). As it turns out, the measures themselves are uncorrelated (both times) and, most importantly, only the questionnaire measure exhibits test-re-test stability (

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. 6710

We estimate the risk attitudes of a large sample of individuals from various fishing communities along the west coast of SouthAfrica. Female fishers and rights holders are found to be more risk averse than their male counterparts,while rights holders are found to be less risk averse relative to subjects without fishing rights. Risk attitudes are found to be correlated with compliance with fisheries regulations. In particular, a greater degree of risk aversion translates into a reduction in compliance. Furthermore, in the case of gender, female fishers and rights holders aremore likely to complywith fisheries regulations. Key words: compliance, experiments, fishing rights, risk attitudes, risk aversion. JEL Classifications: D81 and Q22. Financial risk is embedded in the economic environment within which commercial and small-scale fishers operate: this risk derives from product price uncertainty, imperfect information regarding resource stocks and location, dynamic changes in stock levels and prices, and the evolution of fisheries regula-tion (Smith andWilen 2005;Eggert andLokina 2007). As such, uncertainty and appetite for risk are important elements of any analysis of fisher behavior (Mistian and Strand 2000). Despite a strengthening in law enforcement in the last ten years, non-compliance in South African fisheries has persisted (Hauck 2009). The objectives of this article are to character-ize risk attitudes amongst people from South African fishing communities, and to determine how these attitudes are related to poaching and overfishing in these communities. To our knowledge, this article is the first empirical paper to relate risk preferences to compli-ance where risk preferences have been elicited

www.jenecon.de

This paper examines the factors associated with risky money management behaviors, utilizing a uniquely rich survey dataset on college students. The data include a wide range of respondent characteristics and experiences during and prior to college that shape money management skills, attitudes and self-confidence. An important component of the data derives from carefully controlled incentivized choice experiments conducted by the authors to measure respondents’ risk and time preferences. Both the subjects ’ degree of impatience (as measured across choices between deferred rewards) and their levels of risk tolerance turn out to have significant explanatory power in estimating several types of risk borrowing and money management behaviors. 1.

experimental games

Recent financial studies often assume agents have Epstein and Zin (1989) preferences, preferences which require agents to care about when uncertainty is resolved. Under this “recursive-preference” framework, the preference for uncertainty resolution is entirely determined by an agent’s preferences for risk and intertemporal substitution. To test the implications of this model, this paper presents an ex-periment designed to elicit subject preferences on risk, time, intertemporal substitution, and uncertainty resolution. Results reveal that most subjects prefer early resolution of uncertainty and have relative risk aversion greater than the reciprocal of the elasticity of intertemporal substitution, consistent with the pre-dictions by recursive preferences. After classifying subjects in a finite mixture model by their risk, time and intertemporal-substitution parameters, regression results show that types predicted by Epstein-Zin to prefer early resolution choose early resolution with 20–50 % higher probability.