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|Title:||Variation in risk seeking behavior in a natural experiment on large losses induced by a natural disaster |
Savage, David A.
|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|
|Document Type:||Working Paper|
|Appears in Collections:||CESifo Working Papers, CESifo Group Munich|
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