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1422. Is lottery-based measurement of risk attitudes subject to a central tendency bias?
Invited abstract in session MD-11: Behavioral Decision Analysis III, stream Behavioural OR.
Monday, 14:30-16:00Room: 12 (building: 116)
Authors (first author is the speaker)
| 1. | Rudolf Vetschera
|
| Dept. of Business Decisions and Analytics, University of Vienna | |
| 2. | Karl Akbari
|
| Department of Business Administration, National Taiwan University of Science and Technology | |
| 3. | Markus Eigruber
|
| Institute of Management Science, TU Wien |
Abstract
Lottery based questionnaires that let subjects chose among several lotteries with identical expected values are a popular way to measure risk attitudes. However, respondents have been shown to select a “middle” alternative too frequently, thus leading to an overestimation of the share of risk neutral individuals in a population. In this paper, we present the result of a comprehensive set of experiments testing the robustness of and different possible explanations for this phenomenon. In particular, we test for robustness in terms of (small) differences in expected values among lotteries, different levels of stakes involved in the lotteries, or whether respondents are incentivized. We also test for alternative explanations such as careless and overly fast responding, misunderstandings of the implications of answers or a general tendency to select an answer that is presented in the middle of a list. Our results indicate that carelessness and higher stakes increase the bias, while higher cognitive abilities and extreme levels of subjectively self-assessed risk attitudes decrease it. We find no significant effects of small differences in expected values or incentives.
Keywords
- Behavioural OR
- Decision Analysis
Status: accepted
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