Exploring the consistency of higher-order risk preferences

Haering, A.; Heinrich, T.; Mayrhofer, T.

Abstract

This study measures higher‐order risk preferences and their consistency. We explore the role of country differences, the variation of stakes, and the framing of lotteries. We observe a robust dichotomous pattern of choice behavior in China, in the USA and in Germany. The majority of choices are consistent with mixed risk aversion or mixed risk‐loving behavior. We also find this pattern after a tenfold increase in the stakes. Finally, our results reveal that this pattern is strengthened if the lotteries are displayed in compound rather than reduced form. In a follow‐up study we explore potential explanations for this framing effect.

Citation

Haering, A., Heinrich, T., & Mayrhofer, T. (2020). Exploring the consistency of higher-order risk preferences. International Economic Review, 61(1), 283-320. https://doi.org/10.1111/iere.12424

• Journal Article Type: Article
• Acceptance Date: Jun 15, 2019
• Online Publication Date: Jan 11, 2020
• Publication Date: Feb 28, 2020
• Deposit Date: Jun 25, 2019
• Publicly Available Date: Jan 11, 2022
• Journal: International Economic Review
• Print ISSN: 0020-6598
• Electronic ISSN: 1468-2354
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 61
• Issue: 1
• Pages: 283-320
• DOI: https://doi.org/10.1111/iere.12424
• Public URL: https://durham-repository.worktribe.com/output/1298845