Risky Choice in the Limelight

Abstract:     
We examine how risk behavior in the limelight differs from that in the anonymity of a typical behavioral laboratory. We perform two experiments, and in both we find that subjects are more risk averse in the limelight. However, risky choices are similarly path dependent in the different treatments. Under both limelight and laboratory conditions, a simple prospect theory model with a path-dependent reference point provides a better explanation for subjects’ behavior than a flexible specification of expected utility of wealth theory.

Number of Pages in PDF File: 31

Keywords: decision making under risk, risky choice, risk preferences, risk aversion, limelight, accountability, game show, public scrutiny, natural experiment, laboratory experiment, expected utility theory, prospect theory

JEL Classification: C91, D81

working papers series