Do Hypothetical Choices Indicate True Risk Preferences? A comparison of stated and revealed data on decisions over risky outcomes

Authors

Sankalp Sharma, University of Nebraska-Lincoln
Karina Schoengold, University of Nebraska, LincolnFollow

Date of this Version

2016

Document Type

Article

Citation

Cornhusker Economics August 24, 2016

Comments

Copyright 2016 University of Nebraska-Lincoln

Abstract

Understanding how individuals make decisions when outcomes are risky is of significant interest to policymakers, economists, and businesses. The answer to questions such as why some drivers purchase the minimum legally allowable level of car insurance while others buy higher coverage, or why some producers buy the highest coverage available for crop insurance, while others do not purchase any insurance is that different people have different risk preferences. Risk preferences are varying attitudes or preferences toward different types of risks.