IDEAS home Printed from https://ideas.repec.org/a/eee/soceco/v77y2018icp96-106.html
   My bibliography  Save this article

Selective insensitivity for losses but not gains in decision making under risk among the poor

Author

Listed:
  • Ronzani, P.
  • Savadori, L.
  • Folloni, G.
  • Mittone, L.

Abstract

We analyzed decision making under risk in a group of 50 poor individuals and a group of 50 rich individuals from the city of Lima, Peru, using the Columbia Card Task game. Contrary to the decisions of the rich, the decisions of the poor were insensitive to changes in the magnitude of potential losses: the risk taking of the poor did not increase when potential losses were low compared to when they were high. The decisions of the poor were also significantly less sensitive to changes in the probability of potential losses, compared to those of the rich. On the contrary, similarly to the decisions of the rich, the decisions of the poor were significantly sensitive to changes in the gain amount: risk taking was higher when the gain amount was higher than when it was lower. The rich sample from Lima showed a similar pattern of risk-taking behavior as other non-poor populations from previous studies. Furthermore, the poor scored higher on the perceived constraints scale and showed the same level of unrealistic optimism for negative events, but less unrealistic optimism for positive events, than the rich.

Suggested Citation

  • Ronzani, P. & Savadori, L. & Folloni, G. & Mittone, L., 2018. "Selective insensitivity for losses but not gains in decision making under risk among the poor," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 77(C), pages 96-106.
    • Handle: RePEc:eee:soceco:v:77:y:2018:i:c:p:96-106
    DOI: 10.1016/j.socec.2018.10.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2214804318304610
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.socec.2018.10.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dean Spears, 2013. "Poverty and probability: aspiration and aversion to compound lotteries in El Salvador and India," Experimental Economics, Springer;Economic Science Association, vol. 16(3), pages 263-284, September.
    2. Frank Schilbach & Heather Schofield & Sendhil Mullainathan, 2016. "The Psychological Lives of the Poor," American Economic Review, American Economic Association, vol. 106(5), pages 435-440, May.
    3. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    4. Luigi Guiso & Monica Paiella, 2008. "Risk Aversion, Wealth, and Background Risk," Journal of the European Economic Association, MIT Press, vol. 6(6), pages 1109-1150, December.
    5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    6. Jacob Westfall & Tal Yarkoni, 2016. "Statistically Controlling for Confounding Constructs Is Harder than You Think," PLOS ONE, Public Library of Science, vol. 11(3), pages 1-22, March.
    7. Chen Li, 2017. "Are the poor worse at dealing with ambiguity?," Journal of Risk and Uncertainty, Springer, vol. 54(3), pages 239-268, June.
    8. Leandro S. Carvalho & Stephan Meier & Stephanie W. Wang, 2016. "Poverty and Economic Decision-Making: Evidence from Changes in Financial Resources at Payday," American Economic Review, American Economic Association, vol. 106(2), pages 260-284, February.
    9. Bates, Douglas & Mächler, Martin & Bolker, Ben & Walker, Steve, 2015. "Fitting Linear Mixed-Effects Models Using lme4," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 67(i01).
    10. Spears Dean, 2011. "Economic Decision-Making in Poverty Depletes Behavioral Control," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-44, December.
    11. repec:cup:judgdm:v:8:y:2013:i:2:p:179-187 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. AsleBagh, Pegah & Bonyadi Naeini, Ali & Moeeni, MohammadReza, 2024. "Investigating the effect of three different factors including experience, personality and color on the decision-making process in stock markets using EEG," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 109(C).
    2. Jinho Kim & Sujeong Park & S. V. Subramanian & Taehoon Kim, 2023. "The Psychological Costs of the COVID-19 Pandemic and Heterogeneous Effects in South Korea: Evidence from a Difference-in-Differences Analysis," Journal of Happiness Studies, Springer, vol. 24(2), pages 455-476, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mika Akesaka & Peter Eibich & Chie Hanaoka & Hitoshi Shigeoka, 2023. "Temporal Instability of Risk Preference among the Poor: Evidence from Payday Cycles," American Economic Journal: Applied Economics, American Economic Association, vol. 15(4), pages 68-99, October.
    2. Astrid Gamba & Elena Manzoni & Luca Stanca, 2017. "Social comparison and risk taking behavior," Theory and Decision, Springer, vol. 82(2), pages 221-248, February.
    3. Cavalcanti, Carina & Fleming, Christopher & Leibbrandt, Andreas, 2022. "Risk externalities and gender: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 51-64.
    4. Strobl, Renate, 2022. "Background risk, insurance and investment behaviour: Experimental evidence from Kenya," Journal of Economic Behavior & Organization, Elsevier, vol. 202(C), pages 34-68.
    5. Yan Chen & Ming Jiang & Erin L. Krupka, 2019. "Hunger and the gender gap," Experimental Economics, Springer;Economic Science Association, vol. 22(4), pages 885-917, December.
    6. Görges, Luise, 2021. "Of housewives and feminists: Gender norms and intra-household division of labour," Labour Economics, Elsevier, vol. 72(C).
    7. Jeffrey Butler & Luigi Guiso & Tullio Jappelli, 2014. "The role of intuition and reasoning in driving aversion to risk and ambiguity," Theory and Decision, Springer, vol. 77(4), pages 455-484, December.
    8. Calvin Mudzingiri & Sevias Guvuriro & Charity Gomo, 2021. "Exploring Association between Self-Reported Financial Status and Economic Preferences Using Experimental Data," JRFM, MDPI, vol. 14(6), pages 1-13, May.
    9. Dietmar Fehr & Günther Fink & Kelsey Jack, 2019. "Poverty, Seasonal Scarcity and Exchange Asymmetries," NBER Working Papers 26357, National Bureau of Economic Research, Inc.
    10. Luise Görges, 2021. "Of housewives and feminists: Gender norms and intra-household division of labour," Working Paper Series in Economics 400, University of Lüneburg, Institute of Economics.
    11. Schröder, David & Cavatorta, Elisa, 2014. "Measuring Ambiguity Preferences," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100593, Verein für Socialpolitik / German Economic Association.
    12. Martin G. Kocher & Julius Pahlke & Stefan T. Trautmann, 2013. "Tempus Fugit : Time Pressure in Risky Decisions," Management Science, INFORMS, vol. 59(10), pages 2380-2391, October.
    13. Di Falco, Salvatore & Berck, Peter & Bezabih, Mintewab & Köhlin, Gunnar, 2019. "Rain and impatience: Evidence from rural Ethiopia," Journal of Economic Behavior & Organization, Elsevier, vol. 160(C), pages 40-51.
    14. Preuss, Malte, 2021. "Intra-individual stability of two survey measures on forward-looking attitude," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 201-227.
    15. Elisa Cavatorta & David Schröder, 2019. "Measuring ambiguity preferences: A new ambiguity preference survey module," Journal of Risk and Uncertainty, Springer, vol. 58(1), pages 71-100, February.
    16. Wright, Austin L. & Sonin, Konstantin & Driscoll, Jesse & Wilson, Jarnickae, 2020. "Poverty and economic dislocation reduce compliance with COVID-19 shelter-in-place protocols," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 544-554.
    17. Cardak, Buly A. & Martin, Vance L., 2023. "Household willingness to take financial risk: Stockmarket movements and life‐cycle effects," Journal of Banking & Finance, Elsevier, vol. 149(C).
    18. Goytom Abraha Kahsay & Daniel Osberghaus, 2018. "Storm Damage and Risk Preferences: Panel Evidence from Germany," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(1), pages 301-318, September.
    19. Quement, Mark T. Le & Marcin, Isabel, 2020. "Communication and voting in heterogeneous committees: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 449-468.
    20. Kimbrough, E.O. & Vostroknutov, A., 2012. "Rules, rule-following and cooperation," Research Memorandum 053, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:soceco:v:77:y:2018:i:c:p:96-106. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620175 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.