Risky Choice in the Limelight

Research output: Contribution to journalArticle

Abstract

This paper examines how risk behavior in the limelight differs from that in anonymity. In two separate experiments, we find that subjects are more risk averse in the limelight. However, risky choices are similarly path dependent in the different treatments. Under both limelight and anonymous laboratory conditions, a simple prospect theory model with a path-dependent reference point provides a better explanation for subjects' behavior than a flexible specification of expected utility theory. In addition, our findings suggest that ambiguity aversion depends on being in the limelight, that passive experience has little effect on risk taking, and that reference points are determined by imperfectly updated expectations.
LanguageEnglish
Pages318-332
JournalReview of Economics and Statistics
Volume98
Issue number2
DOIs
StatePublished - 2016

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utility theory
model theory
anonymity
risk behavior
experiment
experience
Risky choice
Reference point
Anonymity
Prospect theory
Risk-averse
Expected utility theory
Risk taking
Experiment
Ambiguity aversion

Cite this

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title = "Risky Choice in the Limelight",
abstract = "This paper examines how risk behavior in the limelight differs from that in anonymity. In two separate experiments, we find that subjects are more risk averse in the limelight. However, risky choices are similarly path dependent in the different treatments. Under both limelight and anonymous laboratory conditions, a simple prospect theory model with a path-dependent reference point provides a better explanation for subjects' behavior than a flexible specification of expected utility theory. In addition, our findings suggest that ambiguity aversion depends on being in the limelight, that passive experience has little effect on risk taking, and that reference points are determined by imperfectly updated expectations.",
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Risky Choice in the Limelight. / Baltussen, G.; van den Assem, M.J.; van Dolder, Dennie.

In: Review of Economics and Statistics, Vol. 98, No. 2, 2016, p. 318-332.

Research output: Contribution to journalArticle

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