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Revisiting risk aversion: Can risk preferences change with experience?

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  • Ert, Eyal
  • Haruvy, Ernan
Abstract
The Holt–Laury measure for risk aversion has been used extensively in economic studies to measure individuals’ risk aversion. The idea behind this measure is that individuals have stable risk preferences when making decisions under risk. We show that having repeated experiences with the Holt–Laury task can move individuals from exhibiting “risk aversion” to displaying “risk neutrality.” This finding suggests that either risk preferences are not robust to a few experiences or that responses to the tasks indicate something else. We show that a simple model of adaptation can capture this behavioral pattern.

Suggested Citation

  • Ert, Eyal & Haruvy, Ernan, 2017. "Revisiting risk aversion: Can risk preferences change with experience?," Economics Letters, Elsevier, vol. 151(C), pages 91-95.
    • Handle: RePEc:eee:ecolet:v:151:y:2017:i:c:p:91-95
    DOI: 10.1016/j.econlet.2016.12.008
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    References listed on IDEAS

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    Cited by:

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    5. Caferra, Rocco & Morone, Andrea & Pierno, Donato, 2024. "From Measurements to Measures: Learning Risk Preferences under Different Risk Elicitation Methods," MPRA Paper 121590, University Library of Munich, Germany.
    6. Iryna Veryzhenko, 2021. "Who gains and who loses on stock markets? Risk preferences and timing matter," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 28(2), pages 143-155, April.
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    8. Samuel Dodini, 2023. "Insurance Subsidies, the Affordable Care Act, and Financial Stability," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(1), pages 97-136, January.
    9. Ilke Aydogan & Yu Gao, 2020. "Experience and rationality under risk: re-examining the impact of sampling experience," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1100-1128, December.
    10. Pace, Noemi & Daidone, Silvio, 2024. "Impact of development interventions on individual risk preferences: Evidence from a field-lab experiment and survey data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 111(C).
    11. Gary Charness & Nir Chemaya & Dario Trujano-Ochoa, 2023. "Learning your own risk preferences," Journal of Risk and Uncertainty, Springer, vol. 67(1), pages 1-19, August.
    12. Charness, Gary & Chemaya, Nir, 2023. "Repeated experience and consistent risk preferences," Economics Letters, Elsevier, vol. 233(C).
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    14. Funke, Katja & Hirschauer, Norbert & Peth, Denise & Mußhoff, Oliver & Becker, Oliver Arránz, 2019. "Can personality traits explain compliance behaviour? - A study of compliance with water-protection rules in German agriculture," SocArXiv jnexr, Center for Open Science.

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