Do the Wealthy Risk More Money? An Experimental Comparison

Are poor people more or less likely to take money risks than wealthy folks? We find that risk attraction is more prevalent among the wealthy when the amounts of money at risk are small (not surprising, since ten dollars is a smaller amount for a wealthy person than for a poor one), but, interestingly, for the larger amounts of money at risk the fraction of the nonwealthy displaying risk attraction exceeds that of the wealthy. We also replicate our previous finding that many people display risk attraction for small money amounts, but risk aversion for large ones. We argue that preferences yielding “risk attraction for small money amounts, together with risk aversion for larger amounts, at all levels of wealth,” while contradicting the expected utility hypothesis, may be well-defined, independently of reference points, on the choice space.