Risk Aversion and Inconsistencies - Does the Choice of Risk Elicitation Method and Display Format Influence the Outcomes?

In the past decade, many studies measured individual risk attitude with different elicitation methods in a within-subject design and found significant disparity across the elicitation methods. According to the existing literature, there are also differences in the observed understanding of the elicitation methods measured by the inconsistency rate. However, there are no studies that compare the inconsistency rate across different elicitation methods in a within-subject design. Therefore, we intrapersonally compare the inconsistency rate and the risk attitude of German agricultural students in two different lottery tasks: the lottery task by Holt and Laury (2002) as well as the one by Brick, Visser and Burns (2012). Moreover, we analyze in a between-subject design whether the visualization of a lottery task for a better understanding results in differences in the elicited risk attitude and can ultimately lead to the desired reduction of the inconsistency rate. Results show that the elicited risk attitudes measured by the different lottery tasks are significantly different in both display formats since the participants’ responses are more risk averse in the more complex Holt-and-Laury task. Moreover, we find that the visualization results in more risk averse responses in both lottery tasks. According to the inconsistency rate, we find that the Brick-Visser-Burns task is better understood than the Holt-and-Laury task, especially in the textual display format. Furthermore, the visual display format of the Holt-and-Laury task results in a significantly better understanding compared to the textual display format.

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JEL Codes:
C91 – D80 – O10

 Record created 2017-04-01, last modified 2020-10-28

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