Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85954
Authors: 
van Praag, Bernard M.S.
Booij, Adam S.
Year of Publication: 
2003
Series/Report no.: 
Tinbergen Institute Discussion Paper 03-018/3
Abstract: 
In this paper we analyze a large sample of individual responses to six lottery questions. Wederive a simultaneous estimate of risk aversion ? and the time preference discount rate ? perindividual. This can be done because the consumption of a large prize is smoothed over a largertime period. It is found that ? and ? strongly vary over individuals, while they are negativelycorrelated with a correlation coefficient of -.3. Furthermore we explain ? and ? by income,age, gender, entrepreneurship and an obesity index. Very significant effects are found. If weexplain ? in a simple model where time discounting is ignored, we find completely differentestimates for ? . We conclude that in the case of lotteries with big prizes a simultaneous estimateof ? and ? is needed in order to avoid misspecification.
Subjects: 
Expected Utility
Risk Aversion
Time Preference
Lotteries
Hypothetical Questions.
JEL: 
D12
D80
D90
E21
Document Type: 
Working Paper

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