Inducing Risk Neutral Preferences with Binary Lotteries: A Reconsideration

Glenn W. Harrison, Jimmy Martínez-Correa, J. Todd Swarthout

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstrakt

We evaluate the binary lottery procedure for inducing risk neutral behavior. We strip the experimental implementation down to bare bones, taking care to avoid any potentially confounding assumptions about behavior having to be made. In particular, our evaluation does not rely on the assumed validity of any strategic equilibrium behavior, or even the customary independence axiom. We show that subjects sampled from our population are generally risk averse when lotteries are defined over monetary outcomes, and that the binary lottery procedure does indeed induce a statistically significant shift toward risk neutrality. This striking result generalizes to the case in which subjects make several lottery choices and one is selected for payment.
OriginalsprogEngelsk
TidsskriftJournal of Economic Behavior & Organization
Vol/bind94
Udgave nummerOctober
Sider (fra-til)145-159
ISSN0167-2681
DOI
StatusUdgivet - 2013

Emneord

  • Binary lottery procedure
  • Experimental economics
  • Risk neutrality

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