Risky Choice in the Limelight

33 Pages Posted: 14 May 2012 Last revised: 1 May 2016

See all articles by Guido Baltussen

Guido Baltussen

Erasmus University Rotterdam (EUR); Robeco Quantitative Investments

Martijn J. van den Assem

Vrije Universiteit Amsterdam

Dennie van Dolder

University of Essex - Department of Economics

Date Written: October 1, 2014


This paper examines how risk behavior in the limelight differs from that in anonymity. In two separate experiments 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 anonymous 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 theory. Additionally, our findings suggest that ambiguity aversion depends on being in the limelight, that passive experience has little effect on risk taking, and that reference points are determined by imperfectly updated expectations.

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

JEL Classification: C91, D81

Suggested Citation

Baltussen, Guido and van den Assem, Martijn J. and van Dolder, Dennie, Risky Choice in the Limelight (October 1, 2014). Review of Economics and Statistics, Vol. 98, No. 2, pp. 318-332, May 2016, Available at SSRN: https://ssrn.com/abstract=2057134 or http://dx.doi.org/10.2139/ssrn.2057134

Guido Baltussen

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3011 AG

Martijn J. Van den Assem (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV

Dennie Van Dolder

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

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