We use data from 298 showings of the television program "Affari Tuoi," which involves contestants making decisions between risky prospects with possible prizes of up to half a million euros, to estimate three models of decision-making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. We find that Regret-Rejoice does not significantly improve upon Expected Utility, while Rank-Dependent outperforms it. Interestingly, we find that the CARA specification fits significantly better than the conventionally-adopted CRRA specification. Crucially, we find a significant role for unobserved heterogeneity, implying that our estimates provide more superior estimates of risk attitude and of probability weighting than other studies.

Risk Attitude in Real Decision Problems / Di Cagno, Daniela Teresa; F., Botti; A., Conte; C., D'Ippoliti. - In: THE B.E. JOURNAL OF ECONOMIC ANALYSIS & POLICY. - ISSN 1935-1682. - 8:(2008), pp. "1"-"30".

Risk Attitude in Real Decision Problems

DI CAGNO, DANIELA TERESA;
2008

Abstract

We use data from 298 showings of the television program "Affari Tuoi," which involves contestants making decisions between risky prospects with possible prizes of up to half a million euros, to estimate three models of decision-making under risk: Expected Utility, Rank-Dependent Expected Utility and Regret-Rejoice. We find that Regret-Rejoice does not significantly improve upon Expected Utility, while Rank-Dependent outperforms it. Interestingly, we find that the CARA specification fits significantly better than the conventionally-adopted CRRA specification. Crucially, we find a significant role for unobserved heterogeneity, implying that our estimates provide more superior estimates of risk attitude and of probability weighting than other studies.
2008
Risk Attitude in Real Decision Problems / Di Cagno, Daniela Teresa; F., Botti; A., Conte; C., D'Ippoliti. - In: THE B.E. JOURNAL OF ECONOMIC ANALYSIS & POLICY. - ISSN 1935-1682. - 8:(2008), pp. "1"-"30".
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11385/3616
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