The reflection effect for higher order risk preferences
Bleichrodt,Han van Bruggen,Paul
Bleichrodt,Han
van Bruggen,Paul
Abstract
Higher-order risk preferences are important determinants of economic behavior. We apply insights from behavioral economics: we measure higher-order risk preferences for pure gains and losses. We find a reflection effect not only for second-order risk preferences, as did Kahneman and Tversky (1979), but also for higher-order risk preferences: we find risk aversion, prudence and intemperance for gains and much more risk-loving preferences, imprudence and temperance for losses. These findings are at odds with a universal preference for combining good with bad or good with good, which previous results suggest may underlie higher-order risk preferences.
Description
Publisher Copyright: © 2020 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Date
2022-07
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
risk apportionment, higher order risk preferences, risk aversion, prudence, temperance, reference dependence, C91 - Laboratory, Individual Behavior, D81 - Criteria for Decision-Making under Risk and Uncertainty, D91 - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
Citation
Bleichrodt, H & van Bruggen, P 2022, 'The reflection effect for higher order risk preferences', Review of Economics and Statistics, vol. 104, no. 4, pp. 705-717. https://doi.org/10.1162/rest_a_00980
License
info:eu-repo/semantics/openAccess