Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/197706
Authors: 
Masuda, Takehito
Lee, Eungik
Year of Publication: 
2018
Series/Report no.: 
ISER Discussion Paper No. 1034
Abstract: 
This paper provides experimental evidence of the role of higher order risk attitudes - especially prudence - in prevention behavior. Prudence, under an expected utility framework, increases (decreases) self-protection effort compared to the risk neutral level when the risk of losing part of an income exists in a future (the same) period. Motivated by these predictions that give the exact test on prudence, an experiment was designed where subjects go through higher order risk attitude elicitation and make a self-protection decision. In contrast to expected utility theory, the observed efforts are less than the risk neutral level, regardless of the timing of loss. This violation of expected utility predictions could be explained by probability weighting.
Subjects: 
Higher order risk attitudes
Prudence
Prevention
Timing of loss
Probability weighting
JEL: 
C91
C92
D81
E21
Document Type: 
Working Paper

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