The Welfare Consequences of Individual-level Risk Preference Estimation
Models of Risk Preferences: Descriptive and Normative Challenges
ISBN: 978-1-83797-269-2, eISBN: 978-1-83797-268-5
Publication date: 23 October 2023
Abstract
Risk preferences play a critical role in almost every facet of economic activity. Experimental economists have sought to infer the risk preferences of subjects from choice behavior over lotteries. To help mitigate the influence of observable, and unobservable, heterogeneity in their samples, risk preferences have been estimated at the level of the individual subject. Recent work has detailed the lack of statistical power in descriptively classifying individual subjects as conforming to Expected Utility Theory (EUT) or Rank Dependent Utility (RDU). I discuss the normative consequences of this lack of power and provide some suggestions to improve the accuracy of normative inferences about individual-level choice behavior.
Keywords
Citation
Monroe, B.A. (2023), "The Welfare Consequences of Individual-level Risk Preference Estimation", Harrison, G.W. and Ross, D. (Ed.) Models of Risk Preferences: Descriptive and Normative Challenges (Research in Experimental Economics, Vol. 22), Emerald Publishing Limited, Leeds, pp. 227-254. https://doi.org/10.1108/S0193-230620230000022005
Publisher
:Emerald Publishing Limited
Copyright © 2023 Brian Albert Monroe