IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/108440.html
   My bibliography  Save this paper

Comparing risk elicitation in lotteries with visual or contextual framing aids

Author

Listed:
  • Estepa-Mohedano, Lorenzo
  • Espinosa, Maria Paz

Abstract

Eliciting risk preferences usually involves tasks that subjects may find complex, such as calculations of expected values and assessment of probabilities in multiple price lists (MPL). There is a serious concern that the decisions of the subjects may be driven by miscalculations or miscalibration of probabilities, rather than by their risk preferences. In this paper, we test whether introducing aids to the usual lottery choiceswould help to reduce the error rate and possibly change risk aversion elicitation. The experiment was run with subjectsfrom a rural area in Honduras. We compare the risk elicitation results of a multiple price list and two different treatments, one with visual aids (graphical representation of probabilities) and the other with contextual framing aids (bills to represent rewards and a distribution of ten beans between the two rewards to represent a lottery). Our results indicate that risk attitudes elicitation was affected with contextual framing aids, reducing risk aversion. For the treatment with visual aids we observe no effect.

Suggested Citation

  • Estepa-Mohedano, Lorenzo & Espinosa, Maria Paz, 2021. "Comparing risk elicitation in lotteries with visual or contextual framing aids," MPRA Paper 108440, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:108440
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/108440/1/MPRA_paper_108440.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tamás Csermely & Alexander Rabas, 2016. "How to reveal people’s preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods," Journal of Risk and Uncertainty, Springer, vol. 53(2), pages 107-136, December.
    2. Loomes, Graham & Moffatt, Peter G & Sugden, Robert, 2002. "A Microeconometric Test of Alternative Stochastic Theories of Risky Choice," Journal of Risk and Uncertainty, Springer, vol. 24(2), pages 103-130, March.
    3. Alekseev, Aleksandr & Charness, Gary & Gneezy, Uri, 2017. "Experimental methods: When and why contextual instructions are important," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 48-59.
    4. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    5. Norbert Hirschauer & Oliver Musshoff & Syster C. Maart-Noelck & Sven Gruener, 2014. "Eliciting risk attitudes -- how to avoid mean and variance bias in Holt-and-Laury lotteries," Applied Economics Letters, Taylor & Francis Journals, vol. 21(1), pages 35-38, January.
    6. Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2020. "Robust inference in risk elicitation tasks," Journal of Risk and Uncertainty, Springer, vol. 61(3), pages 195-209, December.
    7. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2018. "On the Relationship between Cognitive Ability and Risk Preference," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 115-134, Spring.
    8. Gegax, Douglas & Gerking, Shelby & Schulze, William, 1991. "Perceived Risk and the Marginal Value of Safety," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 589-596, November.
    9. Andreas C. Drichoutis & Jayson L. Lusk, 2016. "What can multiple price lists really tell us about risk preferences?," Journal of Risk and Uncertainty, Springer, vol. 53(2), pages 89-106, December.
    10. Matthew Taylor, 2013. "Bias and brains: Risk aversion and cognitive ability across real and hypothetical settings," Journal of Risk and Uncertainty, Springer, vol. 46(3), pages 299-320, June.
    11. Krupnick, Alan & Alberini, Anna & Cropper, Maureen & Simon, Nathalie & O'Brien, Bernie & Goeree, Ron & Heintzelman, Martin, 2002. "Age, Health and the Willingness to Pay for Mortality Risk Reductions: A Contingent Valuation Survey of Ontario Residents," Journal of Risk and Uncertainty, Springer, vol. 24(2), pages 161-186, March.
    12. Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2016. "Risk Aversion Relates To Cognitive Ability: Preferences Or Noise?," Journal of the European Economic Association, European Economic Association, vol. 14(5), pages 1129-1154, October.
    13. Charness, Gary & Gneezy, Uri & Imas, Alex, 2013. "Experimental methods: Eliciting risk preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 43-51.
    14. Chetan Dave & Catherine Eckel & Cathleen Johnson & Christian Rojas, 2010. "Eliciting risk preferences: When is simple better?," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 219-243, December.
    15. Sarah Jacobson & Ragan Petrie, 2009. "Learning from mistakes: What do inconsistent choices over risk tell us?," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 143-158, April.
    16. Enrica Carbone & John D. Hey, 2018. "Which Error Story is Best?," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 16, pages 365-380, World Scientific Publishing Co. Pte. Ltd..
    17. Charness, Gary & Viceisza, Angelino, 2016. "Three Risk-elicitation Methods in the Field - Evidence from Rural Senegal," Review of Behavioral Economics, now publishers, vol. 3(2), pages 145-171, July.
    18. Meraner, Manuela & Musshoff, Oliver & Finger, Robert, 2018. "Using involvement to reduce inconsistencies in risk preference elicitation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 73(C), pages 22-33.
    19. Amador-Hidalgo, Luis & Brañas-Garza, Pablo & Espín, Antonio M. & García-Muñoz, Teresa & Hernández-Román, Ana, 2021. "Cognitive abilities and risk-taking: Errors, not preferences," European Economic Review, Elsevier, vol. 134(C).
    20. Gerking, Shelby & de Haan, Menno & Schulze, William, 1988. "The Marginal Value of Job Safety: A Contingent Valuation Study," Journal of Risk and Uncertainty, Springer, vol. 1(2), pages 185-199, June.
    21. Daniel J. Benjamin & Sebastian A. Brown & Jesse M. Shapiro, 2013. "Who Is ‘Behavioral’? Cognitive Ability And Anomalous Preferences," Journal of the European Economic Association, European Economic Association, vol. 11(6), pages 1231-1255, December.
    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. 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).

    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. 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).
    2. Holzmeister, Felix & Stefan, Matthias, 2019. "The Risk Elicitation Puzzle Revisited: Across-Methods (In)consistency?," OSF Preprints pj9u2, Center for Open Science.
    3. Felix Holzmeister & Matthias Stefan, 2021. "The risk elicitation puzzle revisited: Across-methods (in)consistency?," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 593-616, June.
    4. Felix Holzmeister & Matthias Stefan, 2019. "The risk elicitation puzzle revisited: Across-methods (in)consistency?," Working Papers 2019-19, Faculty of Economics and Statistics, Universität Innsbruck.
    5. Meraner, Manuela & Musshoff, Oliver & Finger, Robert, 2018. "Using involvement to reduce inconsistencies in risk preference elicitation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 73(C), pages 22-33.
    6. repec:cup:judgdm:v:14:y:2019:i:3:p:234-279 is not listed on IDEAS
    7. Tamás Csermely & Alexander Rabas, 2016. "How to reveal people’s preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods," Journal of Risk and Uncertainty, Springer, vol. 53(2), pages 107-136, December.
    8. Nicolas Eber & Patrick Roger & Tristan Roger, 2024. "Finance and intelligence: An overview of the literature," Journal of Economic Surveys, Wiley Blackwell, vol. 38(2), pages 503-554, April.
    9. 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).
    10. Holden , Stein T. & Tilahun , Mesfin, 2019. "The Devil is in the Details: Risk Preferences, Choice List Design, and Measurement Error," CLTS Working Papers 3/19, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 16 Oct 2019.
    11. Lau Lilleholt, 2019. "Cognitive ability and risk aversion: A systematic review and meta analysis," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 14(3), pages 234-279, May.
    12. Willadsen, Helene & Zaccagni, Sarah & Piovesan, Marco & Wengström, Erik, 2024. "Measures of cognitive ability and choice inconsistency," Journal of Economic Behavior & Organization, Elsevier, vol. 220(C), pages 495-506.
    13. Celse, Jeremy & Karakostas, Alexandros & Zizzo, Daniel John, 2023. "Relative risk taking and social curiosity," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 243-264.
    14. Segovia, Michelle & Palma, Marco & Lusk, Jayson L. & Drichoutis, Andreas, 2022. "Visual formats in risk preference elicitation: What catches the eye?," MPRA Paper 115572, University Library of Munich, Germany.
    15. repec:cup:judgdm:v:16:y:2021:i:5:p:1290-1313 is not listed on IDEAS
    16. 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).
    17. Marco Santorsola & Rocco Caferra & Andrea Morone, 2023. "The salience of informed risk: an experimental analysis," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(9), pages 21-35, June.
    18. Anwesha Bandyopadhyay & Lutfunnahar Begum & Philip J. Grossman, 2021. "Gender differences in the stability of risk attitudes," Journal of Risk and Uncertainty, Springer, vol. 63(2), pages 169-201, October.
    19. Brañas-Garza, Pablo & Estepa-Mohedano, Lorenzo & Jorrat, Diego & Orozco, Victor & Rascón-Ramírez, Ericka, 2021. "To pay or not to pay: Measuring risk preferences in lab and field," Judgment and Decision Making, Cambridge University Press, vol. 16(5), pages 1290-1313, September.
    20. Amador, Luis & Brañas-Garza, Pablo & Espín, Antonio M. & Garcia, Teresa & Hernández, Ana, 2019. "Consistent and inconsistent choices under uncertainty: The role of cognitive abilities," MPRA Paper 95178, University Library of Munich, Germany.
    21. Jonathan Chapman & Erik Snowberg & Stephanie Wang & Colin Camerer, 2018. "Loss Attitudes in the U.S. Population: Evidence from Dynamically Optimized Sequential Experimentation (DOSE)," NBER Working Papers 25072, National Bureau of Economic Research, Inc.
    22. Peter John Robinson & W. J. Wouter Botzen & Fujin Zhou, 2021. "An experimental study of charity hazard: The effect of risky and ambiguous government compensation on flood insurance demand," Journal of Risk and Uncertainty, Springer, vol. 63(3), pages 275-318, December.

    More about this item

    Keywords

    risk elicitation; visual aids; contextual framing aids;
    All these keywords.

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:108440. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.