Paper #692

Title:

Do the eealthy risk more money? An experimental comparison

Authors:

Antoni Bosch-Domènech and Joaquim Silvestre

Date:

June 2003 (Revised: January 2005)

Abstract:

Are poor people more or less likely to take money risks than wealthy folks? We find that risk attraction is more prevalent among the wealthy when the amounts of money at risk are small (not surprising, since ten dollars is a smaller amount for a wealthy person than for a poor one), but, interestingly, for the larger amounts of money at risk the fraction of the nonwealthy displaying risk attraction exceeds that of the wealthy. We also replicate our previous finding that many people display risk attraction for small money amounts, but risk aversion for large ones. We argue that preferences yielding “risk attraction for small money amounts, together with risk aversion for larger amounts, at all levels of wealth,” while contradicting the expected utility hypothesis, may be well-defined, independently of reference points, on the choice space.

Keywords:

Risk attraction, risk aversion, wealth, experiments, Leex

JEL codes:

C91, D81

Area of Research:

Behavioral and Experimental Economics

Published in:

The Birgit Grodal Symposium, Karl Vind, editor, Springer Verlag, Berlin, 2006

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