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Journal of Risk and Uncertainty

, Volume 45, Issue 2, pp 159–190 | Cite as

Experts in experiments

How selection matters for estimated distributions of risk preferences
  • Hans-Martin von Gaudecker
  • Arthur van Soest
  • Erik WengströmEmail author
Article

Abstract

An ever increasing number of experiments attempts to elicit risk preferences of a population of interest with the aim of calibrating parameters used in economic models. We are concerned with two types of selection effects, which may affect the external validity of standard experiments: Sampling from a narrowly defined population of students (“experimenter-induced selection”) and self-selection due to non-response or incomplete response of participants in a random sample from a broad population. We find that both types of selection lead to a sample of experts: Participants perform significantly better than the general population, in the sense of fewer violations of revealed preference conditions. Self-selection within a broad population does not seem to matter for average preferences. In contrast, sampling from a student population leads to lower estimates of average risk aversion and loss aversion parameters. Furthermore, it dramatically reduces the amount of heterogeneity in all parameters.

Keywords

Risk aversion Loss aversion Internet surveys Laboratory experiments 

JEL Classification

C90 D81 

Notes

Acknowledgements

Financial support from the Dutch Science Foundation (NWO), the Swedish Institute for Banking Research (Bankforskningsinstitutet), the Wallander-Hedelius Foundation and from the European Union under grant HPRN-CT-2002-00235 (RTN-AGE) is gratefully acknowledged. This paper has made use of the DNB Household Survey and other data collected in the CentERpanel. We thank the team of CentERdata, especially Marika Puumala, for their support with the experiments, as well as Morten Lau and Joachim Winter for very helpful comments on the experimental design. The analysis benefitted from comments received at presentations in Mannheim, Copenhagen, Gothenburg, Montreal, Berlin, Aix-en-Provence, Toulouse, at the XIIth FUR conference at LUISS in Rome, the ESA meetings in Nottingham and Tucson, and a Cemmap workshop in London. Daniel Kemptner provided able research assistance. The computation of results has been facilitated by the use of the bwGRiD (2007–2011). This paper updates and extends results from von Gaudecker et al. (2008) and an early working paper version of von Gaudecker et al. (2011).

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  • Hans-Martin von Gaudecker
    • 1
  • Arthur van Soest
    • 2
  • Erik Wengström
    • 3
    • 4
    Email author
  1. 1.Department of EconomicsUniversität BonnBonnGermany
  2. 2.Department of Econometrics and Operations Research, and NetsparTilburg UniversityTilburgThe Netherlands
  3. 3.Department of EconomicsLund UniversityLundSweden
  4. 4.Department of EconomicsUniversity of CopenhagenCopenhagenDenmark

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