This research was funded by grants from the National Science Foundation and the Preferences Network of the MacArthur Foundation. We thank Mary Ewers, Aaron Kaminsky and Irana Abibova for help running the experiments. We also thank Colin Camerer, Stefano DellaVigna, John Duffy, Drew Fudenberg, Ed Glaeser, David Laibson, George Loewenstein, Muriel Niederle, Matthew Rabin, Al Roth, Stefan Trautmann and seminar participants at Berkeley, Case Western, CMU, Cornell, Harvard, Syracuse and UCLA for helpful comments and conversations.
The Fourfold Pattern of Risk Attitudes in Choice and Pricing Tasks*
Article first published online: 14 OCT 2009
© The Author(s). Journal compilation © Royal Economic Society 2009
The Economic Journal
Volume 120, Issue 545, pages 595–611, June 2010
How to Cite
Harbaugh, W. T., Krause, K. and Vesterlund, L. (2010), The Fourfold Pattern of Risk Attitudes in Choice and Pricing Tasks. The Economic Journal, 120: 595–611. doi: 10.1111/j.1468-0297.2009.02312.x
- Issue published online: 1 JUN 2010
- Article first published online: 14 OCT 2009
- Submitted: 28 August 2007 Accepted: 3 March 2009
We examine the robustness of the fourfold pattern of risk attitudes under two elicitation procedures. We find that individuals are, on average, risk-seeking over low-probability gains and high-probability losses and risk-averse over high-probability gains and low-probability losses when we elicit prices for the gambles. However, a choice-based elicitation procedure, where participants choose between a gamble and its expected value, yields individual decisions that are indistinguishable from random choice. Sensitivity to elicitation procedure holds between and within participants, and remains when participants are allowed to review and change decisions. The price elicitation procedure is more complex; this finding may be further evidence that an increase in cognitive load exacerbates behavioural anomalies.