Averting risk in the face of large losses: Bernoulli vs. Tversky and Kahneman

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• dc.contributor.author Bosch, Antoni (Bosch-Domènech)ca
• dc.contributor.author Silvestre, Joaquimca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2017-07-26T10:42:24Z
• dc.date.available 2017-07-26T10:42:24Z
• dc.date.issued 2006-01-01
• dc.date.modified 2017-07-23T02:10:18Z
• dc.description.abstract We experimentally question the assertion of Prospect Theory that people display risk attraction in choices involving high-probability losses. Indeed, our experimental participants tend to avoid fair risks for large (up to 90), high-probability (80%) losses. Our research hinges on a novel experimental method designed to alleviate the house-money bias that pervades experiments with real (not hypothetical) loses. Our results vindicate Daniel Bernoulli s view that risk aversion is the dominant attitude, But, contrary to the Bernoulli-inspired canonical expected utility theory, we do find frequent risk attraction for small amounts of money at stake. In any event, we attempt neither to test expected utility versus nonexpected utility theories, nor to contribute to the important literature that estimates value and weighting functions. The question that we ask is more basic, namely: do people display risk aversion when facing large losses, or large gains? And, at the risk of oversimplifying, our answer is yes.
• dc.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=932
• dc.identifier.citation Economics Letters, Vol. 107, Issue 2, 180-182, 2010.
• dc.identifier.uri http://hdl.handle.net/10230/295
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 932
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword losses
• dc.subject.keyword risk attraction
• dc.subject.keyword risk aversion
• dc.subject.keyword experiments
• dc.subject.keyword prospect theory
• dc.subject.keyword bernoulli
• dc.subject.keyword kahneman
• dc.subject.keyword tversky
• dc.subject.keyword leex
• dc.subject.keyword Behavioral and Experimental Economics
• dc.title Averting risk in the face of large losses: Bernoulli vs. Tversky and Kahnemanca
• dc.type info:eu-repo/semantics/workingPaper