The 'Bomb' Risk Elicitation Task

Jena Economic Research Paper No. 2012 - 035

29 Pages Posted: 4 Jul 2012

See all articles by Paolo Crosetto

Paolo Crosetto

Grenoble Applied Economics Laboratory

Antonio Filippin

Università degli Studi di Milano; IZA Institute of Labor Economics

Date Written: July 3, 2012

Abstract

This paper presents the Bomb Risk Elicitation Task (BRET), an intuitive procedure aimed at measuring risk attitudes. Subjects decide how many boxes to collect out of 100, one of which containing a bomb. Earnings increase linearly with the number of boxes accumulated but are zero if the bomb is also collected. The BRET requires minimal numeracy skills, avoids truncation of the data, allows to precisely estimate both risk aversion and risk seeking, and is not affected by the degree of loss aversion or by violations of the Reduction Axiom. We validate the task and test its robustness in a large-scale experiment. Choices react significantly to the stakes and to the size of the choice set. Our experiment rationalizes the gender gap that often characterizes choices under uncertainty by means of a higher loss rather than risk aversion.

Keywords: risk aversion, loss aversion, elicitation method

JEL Classification: C81, C91, D81

Suggested Citation

Crosetto, Paolo and Filippin, Antonio, The 'Bomb' Risk Elicitation Task (July 3, 2012). Jena Economic Research Paper No. 2012 - 035. Available at SSRN: https://ssrn.com/abstract=2100356 or http://dx.doi.org/10.2139/ssrn.2100356

Paolo Crosetto (Contact Author)

Grenoble Applied Economics Laboratory ( email )

BP 47
38040 Grenoble
France

Antonio Filippin

Università degli Studi di Milano ( email )

Milan, 20122
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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