Incentive Effects on Risk Attitude in Small Probability Prospects
نویسندگان
چکیده
Most studies on the effect of incentives on risk attitude use within-subject designs. This may however raise an issue of sequentiality of effects as later choices may be influenced by earlier ones. This paper reports between-subject results on the effect of monetary stakes on risk attitudes for small probability prospects. Under low stakes, we find the typical risk seeking for small probabilities predicted by prospect theory. Under high stakes however risk seeking is dramatically reduced. This suggests that utility is not consistently concave over the outcome space, but may contain a convex section for very small amounts. JEL-Code: C91, D81, D89
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