Investigating Risky Choices Over Losses Using Experimental Data |
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Authors: | Email author" target="_blank">Charles?F?MasonEmail author Jason?F?Shogren Chad?Settle John?A?List |
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Institution: | (1) Department of Economics and Finance, University of Wyoming, USA;(2) Department of Economics, University of Tulsa, USA;(3) AREC and Department of Economics, University of Maryland, and NBER, USA |
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Abstract: | We conduct a battery of experiments in which agents make choices from several pairs of all-loss-lotteries. Using these choices, we estimate a representation of individual preferences over lotteries. We find statistically and economically significant departures from expected utility maximization for many subjects. We also estimate a preference representation based on summary statistics for behavior in the population of subjects, and again find departures from expected utility maximization. Our results suggest that public policies based on an expected utility approach could significantly underestimate preferences and willingness to pay for risk reduction.JEL Classification: C91, D81 |
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Keywords: | risky decision-making loss domain experiments |
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