Risk tolerance in the present and the future: An experimental study

Research output: Contribution to journalArticlepeer-review

52 Scopus citations

Abstract

We design an experiment to study the consistency of risk preferences between lotteries that are resolved and paid in the present versus in the future. The results show that a substantial fraction of subjects (38.6%) exhibits a greater level of risk aversion for lotteries resolved and paid in the present than in the future. Additional treatments suggest that the effect is neither specific to gambles that are realized immediately, nor is due to steep discounting of future payoffs. Our experiment suggests that risk tolerance increases the farther in the future the gamble is realized.

Original languageEnglish (US)
Pages (from-to)401-412
Number of pages12
JournalManagerial and Decision Economics
Volume27
Issue number6
DOIs
StatePublished - Sep 2006
Externally publishedYes

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation

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