Risk Aversion when Gains are Likely and Unlikely: Evidence from a Natural Experiment with Large Stakes
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In the television show Deal or No Deal a contestant is endowed with a sealed box, which potentially contains a large monetary prize. In the course of the show the contestant learns more information about the distribution of possible monetary prizes inside her box. Consider two groups of contestants, who learned that the chances of their boxes containing a large prize are 20% and 80% correspondingly. Contestants in both groups receive qualitatively similar price offers for selling the content of their boxes. If contestants are less risk averse when facing unlikely gains, the price offer is likely to be more frequently rejected in the first group than in the second group. However, the fraction of rejections is virtually identical across two groups. Thus, contestants appear to have identical risk attitudes over (large) gains of low and high probability.
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- Risk Aversion when Gains are Likely and Unlikely: Evidence from a Natural Experiment with Large Stakes
Theory and Decision
Volume 64, Issue 2-3 , pp 395-420
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- risk attitude
- risk aversion
- risk seeking
- natural experiment
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- 1. Institute for Empirical Research in Economics, University of Zurich, Winterthurerstrasse 30, CH-8006, Zurich, Switzerland
- 2. Institute for Social and Economic Research and Policy, Columbia University, International Affairs Building 420 West 118th Street, 3355, New York, 10027, USA