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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/61006
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| Title: | | Variation in risk seeking behavior in a natural experiment on large losses induced by a natural disaster  |
| Authors: | | Page, Lionel Savage, David A. Torgler, Benno |
| Issue Date: | | 2012 |
| Series/Report no.: | | CESifo Working Paper: Behavioural Economics 3878 |
| Abstract: | | This study explores people's risk attitudes after having suffered large real-world losses following a natural disaster. Using the margins of the 2011 Australian floods (Brisbane) as a natural experimental setting, we find that homeowners who were victims of the floods and face large losses in property values are 50% more likely to opt for a risky gamble - a scratch card giving a small chance of a large gain ($ 500,000) - than for a sure amount of comparable value ($ 10). This finding is consistent with prospect theory predictions of the adoption of a risk-seeking attitude after a loss. |
| Subjects: | | decision under risk large losses natural experiment |
| JEL: | | D03 D81 C93 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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