Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76185
Authors: 
Fehr-Duda, Helga
Bruhin, Adrian
Epper, Thomas F.
Schubert, Renate
Year of Publication: 
2008
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0708
Abstract: 
How does risk tolerance vary with stake size? This important question cannot be adequately answered if framing effects, nonlinear probability weighting, and heterogeneity of preference types are neglected. We show that, contrary to gains, no coherent change in relative risk aversion is observed for losses. The increase in relative risk aversion over gains cannot be captured by the curvature of the utility function. It is driven predominantly by a change in probability weighting of a majority group of individuals who exhibit more rational probability weighting at high stakes. These results not only challenge expected utility theory, but also prospect theory.
Document Type: 
Working Paper

Files in This Item:
File
Size
398.02 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.