Centre for Decision Research and Experimental Economics

CeDEx 2010-11: Small-Scale Changes in Wealth and Attitudes Towards Risk


This paper reports on an experiment designed to examine the effects of small-scale changes in wealth on risk attitudes. We find that the money given prior to risky choices does not induce a change of subjects’ risk preferences. This result supports a key assumption in a recent literature over calibration critique of decision theories. Furthermore, as the money given to subjects in our experiment is administered in between risky tasks and framed as a reward rather than a windfall gain, our result suggests that experimental findings reporting that a prior monetary gain induces individuals to take more risks (housemoney effect) may be more sensitive to prior experience with the riskelicitation task or framing of the money than previously thought.

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Sergio Sousa


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Posted on Tuesday 1st June 2010

Centre for Decision Research and Experimental Economics

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