Do Measures of Risk Attitude in the Laboratory Predict Behavior under Risk In and Outside of the Laboratory?

56 Pages Posted: 20 Jun 2019

See all articles by Gary Charness

Gary Charness

University of California, Santa Barbara (UCSB) - Department of Economics

Thomas Garcia

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE)

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS; IZA Institute of Labor Economics; Global Labor Organization (GLO)

Multiple version iconThere are 3 versions of this paper

Date Written: June 12, 2019

Abstract

We consider the external validity of laboratory measures of risk attitude. Based on a large-scale experiment using a representative panel of the Dutch population, we test if these measures can explain two different types of behavior: (i) behavior in laboratory risky financial decisions, and (ii) behavior in naturally-occurring field behavior under risk (financial, health and employment decisions). We find that measures of risk attitude are related to behavior in laboratory financial decisions and the most complex measures are outperformed by simpler measures. However, measures of risk attitude are not related to risk-taking in the field, calling into question the methods currently used for the purpose of measuring actual risk preferences. We conclude that while the external validity of measures of risk attitude holds in closely related frameworks, this validity is compromised in more remote settings.

Keywords: risk preferences, elicitation methods, lab-in-the-field experiment

JEL Classification: C91; C93; D81

Suggested Citation

Charness, Gary and Garcia, Thomas and Offerman, Theo and Villeval, Marie Claire, Do Measures of Risk Attitude in the Laboratory Predict Behavior under Risk In and Outside of the Laboratory? (June 12, 2019). Available at SSRN: https://ssrn.com/abstract=3397601 or http://dx.doi.org/10.2139/ssrn.3397601

Gary Charness

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States
805-893-2412 (Phone)
805-893-8830 (Fax)

Thomas Garcia

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) ( email )

93, chemin des Mouilles
Ecully, 69130
France

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4294 (Phone)
+31 20 525 5283 (Fax)

Marie Claire Villeval (Contact Author)

Groupe d'Analyse et de Théorie Economique (GATE), CNRS ( email )

93, chemin des Mouilles
Ecully, 69130
France
+33 472 86 60 79 (Phone)
+33 472 86 60 90 (Fax)

HOME PAGE: http://www.gate.cnrs.fr/equipe/perso/villeval/villeval.html

IZA Institute of Labor Economics

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

Global Labor Organization (GLO) ( email )

Collogne
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
19
Abstract Views
219
PlumX Metrics