Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227250
Authors: 
Arslan, Ruben C.
Brümmer, Martin
Dohmen, Thomas
Drewelies, Johanna
Hertwig, Ralph
Wagner, Gert G.
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13723
Abstract: 
People differ in their willingness to take risks. Recent work found that revealed preference tasks (e.g., laboratory lotteries)—a dominant class of measures—are outperformed by survey-based stated preferences, which are more stable and predict real-world risk taking across different domains. How can stated preferences, often criticised as inconsequential "cheap talk," be more valid and predictive than controlled, incentivized lotteries? In our multimethod study, over 3,000 respondents from population samples answered a single widely used and predictive risk-preference question. Respondents then explained the reasoning behind their answer. They tended to recount diagnostic behaviours and experiences, focusing on voluntary, consequential acts and experiences from which they seemed to infer their risk preference. We found that third- party readers of respondents' brief memories and explanations reached similar inferences about respondents' preferences, indicating the intersubjective validity of this information. Our results help unpack the self perception behind stated risk preferences that permits people to draw upon their own understanding of what constitutes diagnostic behaviours and experiences, as revealed in high-stakes situations in the real world.
Subjects: 
risk preferences
self-report
self-perception
JEL: 
D80
D81
D91
D01
Document Type: 
Working Paper

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