Risk-loving bullies
Here is an interesting post on risk preferences and physical strength. Hat-tip: Marginal Revolution
Category: Experimental
Risk Aversion in the Laboratory
Many experimental economists have been interested in measuring the level of risk aversion as well as the determinants of risk aversion. These studies often take place in a controlled, laboratory setting and designing an experiment which will elicit responses which are true to life is essential. In “Risk Aversion in the Laboratory,” Harrison and Rutström…
How to present your lottery in an economic experiment
How should you present a lottery to a subject of an economic experiment? Is a pie chart the best? What about a Holt & Laury style chart? I have compiled a document (“Lottery Presentation Styles“) to give you some suggestions.
Testing for Prudence
Many economists over time have tried to measure how risk averse (or risk loving) people are. For instance, some risk averse individuals would prefer having $40 for sure compared to playing a game where if the coin lands heads you get $100 and if the coin lands tails you get $0. Risk averse individuals are…
Revealed Preferences
Generally, economists believe that individuals are rational and make choices to maximize utility. How do you reconcile the fact that most people would prefer to own a Ferrari, but actually own a car like a Toyota Matrix? Once you take into account all aspects of this choice (including price) then the Toyota Matrix doesn’t look…
Health Insurance keeps us from getting sick?
John Tierney writes in The New York Times (“Appeasing the Gods…“) that “”We buy insurance not just for peace of mind or to protect ourselves financially, but because…we think buying health insurance will keep us from getting sick.” A rational person would believe that buying insurance against an event will not alter the probability that…
Risk Aversion, Impatience and Cognitive Ability
Are smart people risk averse? Are dumb people impatient? This is what Thomas Dohmen, Armin Falk, David Huffman, Uwe Sunde explore in their 2007 Discussion paper. Using data from a choice experiment of 1000 German adults, the authors tested for risk aversion using a Holt & Laury framework, and for impatience by varying the annual…
Willingess to pay (WTP) perspectives
Many health economists wonder how much individuals would be willing to pay for a treatment. Since most medical care is paid by third parties (i.e. private insurance companies or the government) we can not use revealed preference econometrics which has been used in other areas of economics. Instead, many economists ask individuals directly these valuation…
Welfarists vs. Extra-welfarists
Health economists, policy makers, physicians and public health officials all want to maximize the well-being of society. These groups evaluate different medical treatments or public health interventions and then determine if the benefit is worth the cost. In an opinion piece by Dorte Gyrd-Hansen in Pharmacoeconomics (2005), two schools of thought are examined. Those who…
Randomization Bias and the Show-up fee
Many economists have conducted experiments to analyze the preferences of different populations. In particular, many researchers have attempted to measure the degree of risk aversion or risk loving for a given population. The researcher hopes that his or her subjects are representative of the overall risk aversion composition of the population sampled. A working paper…