IDEAS home Printed from https://ideas.repec.org/a/kap/expeco/v10y2007i2p123-141.html
   My bibliography  Save this article

Stability of risk preference parameter estimates within the Becker-DeGroot-Marschak procedure

Author

Listed:
  • Duncan James

Abstract

This paper reports new data from both selling and buying versions of the Becker-DeGroot-Marschak (BDM) procedure. First, when using the selling version of BDM, the cross-sectional mean of CRRA risk preference parameter estimates shifts from a value consistent with “as if” risk-seeking behavior in the early baseline to a value closer to “as if” risk neutrality in the late baseline. Second, when using the buying version of BDM, the cross-sectional mean of CRRA risk preference parameter estimates does not appear to change over time in a statistically significant manner. The cross-sectional mean from the late baseline of the buying version of BDM is closer to “as if” risk neutrality and to the late baseline estimates from the selling version of BDM than it is to either early baseline estimates from the selling version of BDM or typical estimates from the first price auction. Use of dominated offers is correlated with deviations from “as if” risk neutrality; this suggests the possibility that the early deviations from “as if” risk neutrality reflect errors. Copyright Economic Science Association 2007

Suggested Citation

  • Duncan James, 2007. "Stability of risk preference parameter estimates within the Becker-DeGroot-Marschak procedure," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 123-141, June.
  • Handle: RePEc:kap:expeco:v:10:y:2007:i:2:p:123-141
    DOI: 10.1007/s10683-006-9136-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10683-006-9136-y
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s10683-006-9136-y?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. Harrison, Glenn W, 1990. "Risk Attitudes in First-Price Auction Experiments: A Bayesian Analysis," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 541-546, August.
    2. Isaac, R Mark & James, Duncan, 2000. "Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-187, March.
    3. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
    4. Kachelmeier, Steven J & Shehata, Mohamed, 1992. "Examining Risk Preferences under High Monetary Incentives: Experimental Evidence from the People's Republic of China," American Economic Review, American Economic Association, vol. 82(5), pages 1120-1141, December.
    5. Cox, James C. & Isacc, R. Mark & Cech, Paula-Ann & Conn, David, 1996. "Moral Hazard and Adverse Selection in Procurement Contracting," Games and Economic Behavior, Elsevier, vol. 17(2), pages 147-176, December.
    6. Cox, James C. & Isaac, R. Mark, 2008. "Procurement Contracting," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 71, pages 669-675, Elsevier.
    7. R. Mark Isaac & Duncan James, 2000. "Asset Markets: How They Are Affected by Tournament Incentives for Individuals," American Economic Review, American Economic Association, vol. 90(4), pages 995-1004, September.
    8. R. Isaac & Duncan James, 2000. "Robustness of the Incentive Compatible Combinatorial Auction," Experimental Economics, Springer;Economic Science Association, vol. 3(1), pages 31-53, June.
    9. Attiyeh, Greg & Franciosi, Robert & Isaac, R Mark, 2000. "Experiments with the Pivot Process for Providing Public Goods," Public Choice, Springer, vol. 102(1-2), pages 95-114, January.
    10. Cox, James C. & Sadiraj, Vjollca, 2006. "Small- and large-stakes risk aversion: Implications of concavity calibration for decision theory," Games and Economic Behavior, Elsevier, vol. 56(1), pages 45-60, July.
    11. Robert Dorsey & Laura Razzolini, 2003. "Explaining Overbidding in First Price Auctions Using Controlled Lotteries," Experimental Economics, Springer;Economic Science Association, vol. 6(2), pages 123-140, October.
    12. Cox, James C & Smith, Vernon L & Walker, James M, 1988. "Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
    13. Joyce E. Berg & Lane A. Daley & John W. Dickhaut & John R. O'Brien, 1986. "Controlling Preferences for Lotteries on Units of Experimental Exchange," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 281-306.
    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. John Hey & Andrea Morone & Ulrich Schmidt, 2009. "Noise and bias in eliciting preferences," Journal of Risk and Uncertainty, Springer, vol. 39(3), pages 213-235, December.
    2. Habib, Sameh & Friedman, Daniel & Crockett, Sean & James, Duncan, 2015. "Eliciting risk preferences: Text vs. graphical multiple price lists," Discussion Papers, Research Professorship Market Design: Theory and Pragmatics SP II 2015-501, WZB Berlin Social Science Center.
    3. Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.
    4. 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.
    5. Maximilian Spath, 2023. "The qualitative accuracy of the Becker-DeGroot-Marshak method," Papers 2302.04055, arXiv.org.
    6. Stefan Zeisberger & Dennis Vrecko & Thomas Langer, 2012. "Measuring the time stability of Prospect Theory preferences," Theory and Decision, Springer, vol. 72(3), pages 359-386, March.
    7. Sameh Habib & Daniel Friedman & Sean Crockett & Duncan James, 2017. "Payoff and presentation modulation of elicited risk preferences in MPLs," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(2), pages 183-194, December.
    8. Timothy N. Cason & Charles R. Plott, 2014. "Misconceptions and Game Form Recognition: Challenges to Theories of Revealed Preference and Framing," Journal of Political Economy, University of Chicago Press, vol. 122(6), pages 1235-1270.
    9. Evans, Mary F. & Vossler, Christian A. & Flores, Nicholas E., 2009. "Hybrid allocation mechanisms for publicly provided goods," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 311-325, February.
    10. Cotten, Stephen J. & Santore, Rudy, 2012. "Contingent fee caps, screening, and the quality of legal services," International Review of Law and Economics, Elsevier, vol. 32(3), pages 317-328.
    11. Jim Engle-Warnick & Julie Héroux & Claude Montmarquette, 2009. "Willingness to Pay to Reduce Future Risk," CIRANO Working Papers 2009s-37, CIRANO.
    12. Crockett, Erin & Crockett, Sean, 2019. "Endowments and risky choice," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 344-354.
    13. M. Levati & Andrea Morone & Annamaria Fiore, 2009. "Voluntary contributions with imperfect information: An experimental study," Public Choice, Springer, vol. 138(1), pages 199-216, January.

    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. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2002. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Journal of Economic Theory, Elsevier, vol. 104(1), pages 247-272, May.
    2. Grundl, Serafin & Zhu, Yu, 2023. "Robust inference in first-price auctions: Overbidding as an identifying restriction," Journal of Econometrics, Elsevier, vol. 235(2), pages 484-506.
    3. Collins, Sean M. & James, Duncan, 2024. "Hidden in plain sight: Payoffs, probability, space, and time in isomorphic tasks," Games and Economic Behavior, Elsevier, vol. 145(C), pages 117-136.
    4. Charles A. Holt & Roger Sherman, 2014. "Risk Aversion and the Winner's Curse," Southern Economic Journal, John Wiley & Sons, vol. 81(1), pages 7-22, July.
    5. Galizzi, Matteo M. & Machado, Sara R. & Miniaci, Raffaele, 2016. "Temporal stability, cross-validity, and external validity of risk preferences measures: experimental evidence from a UK representative sample," LSE Research Online Documents on Economics 67554, London School of Economics and Political Science, LSE Library.
    6. Olivier Armantier & Nicolas Treich, 2006. "Overbidding in Independant Private-Values Auctions and Misperception of Probabilities," CIRANO Working Papers 2006s-15, CIRANO.
    7. Andrea Robbett & Michael K. Graham & Peter Hans Matthews, 2016. "Revenue Implications of Strategic and External Auction Risk," Games, MDPI, vol. 7(1), pages 1-18, January.
    8. Muriel Niederle, 2014. "Gender," NBER Working Papers 20788, National Bureau of Economic Research, Inc.
    9. Friedman, Dan & Sunder, Shyam, 2011. "Risky Curves: From Unobservable Utility to Observable Opportunity Sets," Santa Cruz Department of Economics, Working Paper Series qt36q158jt, Department of Economics, UC Santa Cruz.
    10. Lönnqvist, Jan-Erik & Verkasalo, Markku & Walkowitz, Gari & Wichardt, Philipp C., 2015. "Measuring individual risk attitudes in the lab: Task or ask? An empirical comparison," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 254-266.
    11. Richard Engelbrecht-Wiggans & Elena Katok, 2008. "Regret and Feedback Information in First-Price Sealed-Bid Auctions," Management Science, INFORMS, vol. 54(4), pages 808-819, April.
    12. Friedman, Daniel & Habib, Sameh & James, Duncan & Crockett, Sean, 2018. "Varieties of risk elicitation," Discussion Papers, Research Professorship Market Design: Theory and Pragmatics SP II 2018-501, WZB Berlin Social Science Center.
    13. Radosveta Ivanova‐Stenzel & Timothy C. Salmon, 2008. "Robustness Of Bidder Preferences Among Auction Institutions," Economic Inquiry, Western Economic Association International, vol. 46(3), pages 355-368, July.
    14. Kim, Dong-Hyuk & Ratan, Anmol, 2022. "Disentangling risk aversion and loss aversion in first-price auctions: An empirical approach," European Economic Review, Elsevier, vol. 150(C).
    15. Ertaç, Seda & Hortaçsu, Ali & Roberts, James W., 2011. "Entry into auctions: An experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 168-178, March.
    16. Neugebauer, Tibor & Selten, Reinhard, 2006. "Individual behavior of first-price auctions: The importance of information feedback in computerized experimental markets," Games and Economic Behavior, Elsevier, vol. 54(1), pages 183-204, January.
    17. Richard Engelbrecht-Wiggans & Elena Katok, 2009. "A Direct Test of Risk Aversion and Regret in First Price Sealed-Bid Auctions," Decision Analysis, INFORMS, vol. 6(2), pages 75-86, June.
    18. Paul Healy & John Ledyard & Charles Noussair & Harley Thronson & Peter Ulrich & Giulio Varsi, 2007. "Contracting inside an organization: An experimental study," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 143-167, June.
    19. Booij, Adam S. & van de Kuilen, Gijs, 2009. "A parameter-free analysis of the utility of money for the general population under prospect theory," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 651-666, August.
    20. Dinky Daruvala, 2007. "Gender, risk and stereotypes," Journal of Risk and Uncertainty, Springer, vol. 35(3), pages 265-283, December.

    More about this item

    Keywords

    Risk; Expected utility; Learning;
    All these keywords.

    Statistics

    Access and download statistics

    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:kap:expeco:v:10:y:2007:i:2:p:123-141. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.