Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/61006
Authors: 
Page, Lionel
Savage, David A.
Torgler, Benno
Year of Publication: 
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

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