is there a life after holt and laury (2002)?

Is There a Life After Holt and Laury (2002)?

Ganna PogrebnaG.Pogrebna@warwick.ac.ukwww.gannapogrebna.com

March 11, 2010

GvP

Holt and Laury (2002) ProcedureRelatively “Safe” Option Relatively “Risky” Option

1/10 of 2.00 LCU, 9/10 of 1.60 LCU 1/10 of 3.85 LCU, 9/10 of 0.10 LCU2/10 of 2.00 LCU, 8/10 of 1.60 LCU 2/10 of 3.85 LCU, 8/10 of 0.10 LCU3/10 of 2.00 LCU, 7/10 of 1.60 LCU 3/10 of 3.85 LCU, 7/10 of 0.10 LCU4/10 of 2.00 LCU, 6/10 of 1.60 LCU 4/10 of 3.85 LCU, 6/10 of 0.10 LCU5/10 of 2.00 LCU, 5/10 of 1.60 LCU 5/10 of 3.85 LCU, 5/10 of 0.10 LCU6/10 of 2.00 LCU, 4/10 of 1.60 LCU 6/10 of 3.85 LCU, 4/10 of 0.10 LCU7/10 of 2.00 LCU, 3/10 of 1.60 LCU 7/10 of 3.85 LCU, 3/10 of 0.10 LCU8/10 of 2.00 LCU, 2/10 of 1.60 LCU 8/10 of 3.85 LCU, 2/10 of 0.10 LCU9/10 of 2.00 LCU, 1/10 of 1.60 LCU 9/10 of 3.85 LCU, 1/10 of 0.10 LCU

10/10 of 2.00 LCU, 0/10 of 1.60 LCU 10/10 of 3.85 LCU, 0/10 of 0.10 LCU

GvP

Popularity of Holt and Laury (2002) Google Scholar:

Holt and Laury (2002): 6,350 citations Eckel and Grossman (2002): 411 citations DoSpeRT Scale by Weber et al. (2002): 54 citations

JSTOR: Holt and Laury (2002): 65 citations Eckel and Grossman (2002): 29 citations DoSpeRT Scale by Weber et al. (2002): 6 citations

GvP

Virtues and Vices Virtues:

please the referees cheap and easy to implement “relative” flavor

Vices: not much heterogeneity in the data

(majority of participants “slightly risk averse”/ “risk averse”) inconsistent participants cannot be classified may produce results that are not robust assumes CRRA utility function

GvP

One Empirical Observation

Rank Description0-1 highly risk seeking2 very risk seeking 3 risk seeking4 risk neutral5 slightly risk averse6 risk averse7 very risk averse8 highly risk averse

9-10 extremely risk averse

Holt and Laury Measure (HL) Self-Reported Measure (SR)Rank Description

1 very risk loving2 risk loving3 slightly risk loving4 neutral5 slightly risk averse6 risk averse7 very risk averse

GvP

One Empirical Observation (continued) Innsbruck, Austria (2006-2007) 161 participants

SRRisk

seekingRisk

neutralRisk

averse

HLRisk seeking 6 2 2 10Risk neutral 24 5 4 33Risk averse 62 39 17 118

92 46 23

p=0.000p=0.041

GvP

Controlling for Gender Innsbruck, Austria (2006-2007) 161 participants

SRRisk seeking Risk neutral Risk averse

HLRisk seeking 6 1 2 9Risk neutral 16 3 4 23Risk averse 40 18 8 66

62 22 14

SRRisk seeking Risk neutral Risk averse

HLRisk seeking 0 1 0 1Risk neutral 8 2 0 10Risk averse 22 21 9 52

30 24 9

MEN

WO

MEN

One Empirical Observation (continued) Berlin, Germany (2008) 184 participants

SRRisk

seekingRisk

neutralRisk

averse

HLRisk seeking 13 2 1 16Risk neutral 19 11 7 37Risk averse 61 44 26 131

93 57 34

p=0.000p=0.470

GvP

Controlling for Gender Berlin, Germany (2008) 184 participants

SRRisk seeking Risk neutral Risk averse

HLRisk seeking 8 1 1 10Risk neutral 10 5 4 19Risk averse 35 21 14 70

53 27 19

SRRisk seeking Risk neutral Risk averse

HLRisk seeking 5 1 0 6Risk neutral 9 6 3 18Risk averse 26 23 12 61

40 30 15

MEN

WO

MEN

One Empirical Observation (continued) New York, USA (2007-2009) 562 participants

SRRisk

seekingRisk

neutralRisk

averse

HLRisk seeking 45 5 4 54Risk neutral 96 30 15 141Risk averse 297 47 23 367

438 82 42

p=0.000p=0.000

GvP

Controlling for Gender New York, USA (2007-2009) 562 participants

SRRisk seeking Risk neutral Risk averse

HLRisk seeking 36 1 3 40Risk neutral 71 5 4 80Risk averse 214 9 5 228

321 15 12

SRRisk seeking Risk neutral Risk averse

HLRisk seeking 9 4 1 14Risk neutral 25 25 11 61Risk averse 83 38 18 139

117 67 30

MEN

WO

MEN

Possible Explanations and Questions Incentives “Risk” overconfidence People do not have CRRA utility function

Which measure has an impact on behavior: HL or SR?

GvP

Which measure provides a “correct” representation of individual risk attitude?