Elicitation of Risk Preferences: Complexity Versus Accuracy

  • Christian Köster
  • Heike Y. Schenk-Mathes
  • Dennis Wagner
Chapter
First Online:

Abstract

The answer to the question of how to elicit risk preferences is vital for predicting individual behaviour and the interpretation of experimental data. In this paper, we first present a current overview of the state of the art in the literature on the methods for eliciting risk preferences and categorise the literature in a systematic manner. Second, we conduct an experiment based on the midpoint chaining method (Krzysztofowicz Organ Behav Hum Perform 31(1):88–113, 1983) and evaluate this parameter-free elicitation method with different numbers of supporting data points in light of three popular parametric utility functions and data generated by an additional choice task in our experiment. We find that, at least for our choice problem with simple lotteries, less onerous methods are sufficient to predict decision behaviour.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  • Christian Köster
    • 1
  • Heike Y. Schenk-Mathes
    • 1
  • Dennis Wagner
    • 1
  1. 1.Business Administration and Environmental ManagementClausthal University of TechnologyClausthal-ZellerfeldGermany

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