Heterogeneity in Risky Choice Behaviour in a Broad Population

von Gaudecker, Hans-Martin; <!>van Soest, Arthur; Wengström, Erik

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Heterogeneity in Risky Choice Behaviour in a Broad Population

IZA Discussion Paper No. 4022

39 Pages Posted: 2 Mar 2009 Last revised: 8 May 2025

See all articles by Hans-Martin von Gaudecker

Hans-Martin von Gaudecker

University of Bonn - Economic Science Area; Netspar; Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA)

Arthur van Soest

Tilburg University; Netspar; RAND Corporation; Institute for the Study of Labor (IZA)

Erik Wengström

Department of Economics, Lund University; Hanken School of Economics - Helsinki Graduate School of Economics

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Abstract

We analyse risk preferences using an experiment with real incentives in a representative sample of 1,422 Dutch respondents. Our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics: Utility curvature, loss aversion, preferences towards the timing of uncertainty resolution, and the propensity to choose randomly rather than on the basis of preferences. We find that all four parameters contribute to explaining choice behaviour. The structural parameters are significantly associated with socio-economic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data.

Keywords: uncertainty resolution, loss aversion, risk aversion, field experiments

JEL Classification: C90, D81

Suggested Citation: Suggested Citation

von Gaudecker, Hans-Martin and van Soest, Arthur H. O. and van Soest, Arthur H. O. and Wengström, Erik, Heterogeneity in Risky Choice Behaviour in a Broad Population. IZA Discussion Paper No. 4022, Available at SSRN: https://ssrn.com/abstract=1351186