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To pay or not to pay: Measuring riskpreferences in lab and field

Author

Listed:
  • Pablo Brañas-Garza

    (Universidad Loyola)

  • Lorenzo Estepa Mohedano

    (Universidad Loyola)

  • Diego Jorrat

    (Universidad Loyola)

  • Victor Orozco

    (The World Bank)

  • Ericka Rascón Ramírez

    (Middlesex University London)

Abstract

Measuring risk preferences in the field is critical for policy, however, it can be expensive and maygenerate unequal payoffs due to bad luck. For instance, the commonly used measure of Holt andLaury (2002) relies on a dozen of lottery choices and payments which makes it time consuming andcostly, but also raises moral concerns as a result of the unequal payments generated by the lotteries.We propose a short version of the Holt and Laury (2002) which produces in the lab (Spain) thesame results as the long HL. Using the short HL in the field (Honduras and Nigeria), we observethat paying or not for the measurement of risk preferences produces the same findings. Our low-costapproach makes the measurement of risk preferences simpler, faster and cheaper in the lab and field.

Suggested Citation

  • Pablo Brañas-Garza & Lorenzo Estepa Mohedano & Diego Jorrat & Victor Orozco & Ericka Rascón Ramírez, 2021. "To pay or not to pay: Measuring riskpreferences in lab and field," Working Papers 67, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:67
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    2. Schrieks, Teun & Botzen, W.J. Wouter & Haer, Toon & Aerts, Jeroen C.J.H., 2024. "Drought risk attitudes in pastoral and agro-pastoral communities in Kenya," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 108(C).
    3. Bruns, Selina & Hermann, Daniel & Mußhoff, Oliver, 2022. "Investigating inconsistencies in complex lotteries: The role of cognitive skills of low-numeracy subjects," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 97(C).
    4. Alfonso, Antonio & Brañas-Garza, Pablo & Jorrat, Diego & Lomas, Pablo & Prissé, Benjamin & Vasco, Mónica & Vázquez-De Francisco, María J., 2023. "The adventure of running experiments with teenagers," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 106(C).
    5. Ortiz, Jose M. & Teixeira, Lucas I. & Falcão, Natália N.L. & Soki, Erika A. & Almeida, Raquel M., 2024. "Information simplification and default choices improve financial decisions: A credit card statement experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 110(C).
    6. Novella, Rafael & Ramirez, Ericka G. Rascón, 2024. "Question-order effects on judgements under uncertainty," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 109(C).
    7. Kai Ruggeri & Amma Panin & Milica Vdovic & Bojana Većkalov & Nazeer Abdul-Salaam & Jascha Achterberg & Carla Akil & Jolly Amatya & Kanchan Amatya & Thomas Lind Andersen & Sibele D. Aquino & Arjoon Aru, 2022. "The globalizability of temporal discounting," Nature Human Behaviour, Nature, vol. 6(10), pages 1386-1397, October.
    8. Lovász, Anna & Bat-Erdene, Boldmaa & Cukrowska-Torzewska, Ewa & Rigó, Mariann & Szabó-Morvai, Ágnes, 2023. "Competition, subjective feedback, and gender gaps in performance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 102(C).
    9. Truc Thanh Tran & Nam Khanh Pham, 2024. "Risk Preferences and Entrepreneurial Decision-Making: Evidence from Experimental Methods in Vietnam," Sustainability, MDPI, vol. 16(11), pages 1-16, May.
    10. Jack Fitzgerald, 2024. "Identifying the Impact of Hypothetical Stakes on Experimental Outcomes and Treatment Effects," Tinbergen Institute Discussion Papers 24-070/I, Tinbergen Institute.
    11. Pablo Brañas-Garza & Diego Jorrat & Antonio M. Espín & Angel Sánchez, 2023. "Paid and hypothetical time preferences are the same: lab, field and online evidence," Experimental Economics, Springer;Economic Science Association, vol. 26(2), pages 412-434, April.
    12. Alfonso-Costillo, Antonio, 2021. "Taking risks by flying paper airplanes," MPRA Paper 108541, University Library of Munich, Germany.
    13. Estepa-Mohedano, Lorenzo & Espinosa, María Paz, 2023. "Comparing risk elicitation in lotteries with visual or contextual aids," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 103(C).
    14. Antonio Alfonso & Pablo Brañas-Garza & Diego Jorrat & Benjamín Prissé & María José Vázquez-De Francisco, 2024. "The Baking of Preferences throughout the High School," Working Papers 316, Red Nacional de Investigadores en Economía (RedNIE).
    15. Thomas Meissner & Xavier Gassmann & Corinne Faure & Joachim Schleich, 2023. "Individual characteristics associated with risk and time preferences: A multi country representative survey," Journal of Risk and Uncertainty, Springer, vol. 66(1), pages 77-107, February.
    16. Holden, Stein T. & Tilahun, Mesfin, 2022. "Are risk preferences explaining gender differences in investment behavior?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).

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    More about this item

    Keywords

    Risk preferences; Holt Laury; Field Experiments; Monetary Payoffs; Incentives.;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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