Do the Wealthy Risk More Money? An Experimental Comparison

UPF Economics and Business Working Paper No. 692

38 Pages Posted: 9 Oct 2003

See all articles by Antoni Bosch i Domènech

Antoni Bosch i Domènech

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Joaquim Silvestre

University of California, Davis - Department of Economics

Date Written: April 20, 2003

Abstract

Are poor people more or less likely to take money risks than wealthy folks? We find that risk attraction is more prevalent among the wealthy when the amounts of money at risk are small (not surprising, since ten dollars is a smaller amount for a wealthy person than for a poor one), but, interestingly, for the larger amounts of money at risk the fraction of the nonwealthy displaying risk attraction exceeds that of the wealthy. We also replicate our previous finding that many people display risk attraction for small money amounts, but risk aversion for large ones. We argue that preferences yielding 'risk attraction for small money amounts, together with risk aversion for larger amounts, at all levels of wealth,' while contradicting the expected utility hypothesis, may be well-defined, independently of reference points, on the choice space.

Keywords: Risk attraction, risk aversion, wealth, experiments

JEL Classification: C91, D81

Suggested Citation

Bosch i Domènech, Antoni and Silvestre, Joaquim, Do the Wealthy Risk More Money? An Experimental Comparison (April 20, 2003). UPF Economics and Business Working Paper No. 692, Available at SSRN: https://ssrn.com/abstract=433841 or http://dx.doi.org/10.2139/ssrn.433841

Antoni Bosch i Domènech (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 28 (Phone)
(34-93) 542 17 46 (Fax)

Joaquim Silvestre

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States

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