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The Effect of an Additional Alternative on Measured Risk Preferences in a Field Experiment

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Author Info
Jim Engle-Warnick (McGill University)
Javier Escobal (GRADE)
Sonia Laszlo (McGill University)

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Abstract

We experimentally test for the effect of an additional alternative on the measured risk preferences of farmers in rural Peru. In our experiment, subjects revealed their risk preferences with a series of choices between two gambles. We added a third gamble, which was always dominated by one of the two existing gambles. We found that subjects chose this gamble nearly one quarter of the time, in some cases causing them to appear more risk loving. We conclude that the number of available alternatives should be taken into account for predicting decisions under uncertainty.

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File URL: http://129.3.20.41/eps/exp/papers/0511/0511003.pdf
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Paper provided by EconWPA in its series Experimental with number 0511003.

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Length: 30 pages
Date of creation: 15 Nov 2005
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Handle: RePEc:wpa:wuwpex:0511003

Note: Type of Document - pdf; pages: 30
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Web page: http://129.3.20.41

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Related research
Keywords: risk preferences; risk measurement instruments; experimental economics; field experiments;

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Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Marianne Bertrand & Dean S. Karlan & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2005. "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," Working Papers 918, Economic Growth Center, Yale University. [Downloadable!]
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  2. Mette Wik & Tewodros Aragie Kebede & Olvar Bergland & Stein T. Holden, 2004. "On the measurement of risk aversion from experimental data," Applied Economics, Taylor and Francis Journals, vol. 36(21), pages 2443-2451, December. [Downloadable!] (restricted)
  3. Feder, Gershon, 1980. "Farm Size, Risk Aversion and the Adoption of New Technology under Uncertainty," Oxford Economic Papers, Oxford University Press, vol. 32(2), pages 263-83, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jim Engle-Warnick & Javier Escobal & Sonia Laszlo, 2006. "Risk Preference, Ambiguity Aversion and Technology Choice: Experimental and Survey Evidence from Rural Peru," Artefactual Field Experiments 0037, The Field Experiments Website.
  2. Jim Engle-Warnick & Javier Escobal & Sonia Laszlo, 2007. "Ambiguity Aversion As A Predictor Of Technology Choice: Experimental Evidence From Peru," Departmental Working Papers 2007-04, McGill University, Department of Economics. [Downloadable!]
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