Measuring Risk Aversion Model-Independently

Published: Oct. 11, 2010, 11 a.m.

b"We propose a new method to elicit individuals' risk preferences. Similar to Holt and Laury\\n(2002), we use a simple multiple price-list format. However, our method is based on a general\\nnotion of increasing risk, which allows classifying individuals as more or less risk-averse\\nwithout assuming a specic utility framework. In a laboratory experiment we compare both\\nmethods. Each classies individuals almost identically as risk-averse, -neutral, or -seeking.\\nHowever, classications of individuals as more or less risk-averse dier substantially. Moreover,\\nour approach yields higher measures of risk aversion, and only with our method these\\nmeasures are robust toward increasing stakes."