Risk aversion, level and incentive effects: a laboratorial experiment with ufc students

Authors

  • Ricardo Brito Soares Universidade Federal do Ceará
  • Patrícia Simôes CAEN/UFC
  • Paulo de Melo Jorge Neto Professor Associado da Universidade Federal do Ceará

DOI:

https://doi.org/10.19094/contextus.v0i0.33266

Keywords:

Risk aversion, Lottery, Laboratory experiment, Scale effect, Incentive effect

Abstract

This paper makes an empirical study about decision making under uncertainty among students of the Federal University of Ceará. In order to measure individual risk preferences, an elicitation technique called the Multiple Price Lists is used. Such a methodology was popularized by Holt and Laury (2002) and makes use of a list of paired lotteries, structured in such a way that the number of safe choices of the individual can be used to estimate his or her degree of risk aversion. As a result, the level of risk aversion found is higher than predicted by the theory and the hypothesis of the value scale effect as well as that of the monetary incentive effect are validated by the experiment. Thus, this work shows that there is a tendency to underestimate the willingness of individuals to take risks in hypothetical laboratory experiments, with the possibility of economic losses.

Author Biographies

Ricardo Brito Soares, Universidade Federal do Ceará

Professor Associado do Departamento de Administração e do Curso de Pós-Graduação em Economia/CAEN da UFC

Patrícia Simôes, CAEN/UFC

Doutora em Economia pela Universidade Federal do Ceará/CAEN

Paulo de Melo Jorge Neto, Professor Associado da Universidade Federal do Ceará

PhD em Economia pela University of Illinois, USA

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Published

2018-11-05

How to Cite

Soares, R. B., Simôes, P., & Jorge Neto, P. de M. (2018). Risk aversion, level and incentive effects: a laboratorial experiment with ufc students. Contextus - Contemporary Journal of Economics and Management, 16(esp.), 10–33. https://doi.org/10.19094/contextus.v0i0.33266

Issue

Vol. 16 No. esp.: FEAAC's 80 years 2018

Section

Articles

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