Exposure to Risk and Risk Aversion: A Laboratory Experiment (with Fuhai Hong)

Abstract: We examine whether prior exposure to environments with a varying degree of risk affects individuals’ risk-taking behavior. Using a laboratory experiment, we find that subjects exposed to a high risk environment exhibit higher levels of risk aversion than those who were exposed to a moderate or low risk environment. This effect is not driven by subjects’ realized outcomes from the risk. The finding has implications for theoretical models of decision-making under uncertainty, and can speak to a few current policy debates.

DOI: 10.2139/ssrn.2401438
RePEC: RePEc:nan:wpaper:1403

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