Risk attitude in real decision problems

Botti, F., Conte, A., Di Cagno, D.T. and D’Ippoliti, C. 2008. Risk attitude in real decision problems. The B.E. Journal of Economic Analysis & Policy. 8 (1).

TitleRisk attitude in real decision problems
AuthorsBotti, F., Conte, A., Di Cagno, D.T. and D’Ippoliti, C.
Abstract

We use data from 298 showings of the television program "Affari Tuoi," which involves contestants making decisions between risky prospects with possible prizes of up to half a million euros, to estimate three models of decision-making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. We find that Regret-Rejoice does not significantly improve upon Expected Utility, while Rank-Dependent outperforms it. Interestingly, we find that the CARA specification fits significantly better than the conventionally-adopted CRRA specification. Crucially, we find a significant role for unobserved heterogeneity, implying that our estimates provide more superior estimates of risk attitude and of probability weighting than other studies.

JournalThe B.E. Journal of Economic Analysis & Policy
Journal citation8 (1)
ISSN1935-1682
YearMar 2008
PublisherWalter de Gruyter
Digital Object Identifier (DOI)doi:10.2202/1935-1682.1798
Publication dates
PublishedMar 2008

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