Perceptions of Risk: An Experimental Approach Using Internet Questionnaires

37 Pages Posted: 21 Feb 2008

See all articles by Frank Cowell

Frank Cowell

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)

Date Written: May 2003

Abstract

Building on previous studies on perceptions of inequality, welfare and risk we investigate the structure of individuals&apos' rankings of uncertain prospects in terms of risk and their relationship to individual preferences. We examine three interlinked propositions that are fundamental to the standard economic approach to risk: (i) that rankings by risk are simply the reverse of ranking by preference over distributions with a given mean' (ii) that risk-rankings respect the principle of mean-preserving spreads' (iii) that risk-rankings are independent of whether the individual is personally involved in the gains/losses associated with the uncertain prospects. To do this we use a set of questionnaires implemented through the Virtual Laboratory, a novel experimental setting for the study of normative issues in experimental economics. The results from the questionnaires provide an evaluation of the similitude between individual perceptions of risk and theoretical axioms. They also help identify the individual characteristics that might affect such perceptions.

JEL Classification: C13, D63

Suggested Citation

Cowell, Frank A., Perceptions of Risk: An Experimental Approach Using Internet Questionnaires (May 2003). LSE STICERD Research Paper No. 70. Available at SSRN: https://ssrn.com/abstract=1094863

Frank A. Cowell (Contact Author)

London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 (0)171-955 7277 (Phone)
+44 (0)171-242 2357 (Fax)

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