Hostname: page-component-7b9c58cd5d-sk4tg Total loading time: 0 Render date: 2025-03-17T10:02:18.963Z Has data issue: false hasContentIssue false
  • English
  • Français

Stability of risk preference parameter estimates within the Becker-DeGroot-Marschak procedure

Published online by Cambridge University Press:  14 March 2025

Duncan James
Duncan James*
Affiliation:
Fordham University, Department of Economics, Bronx, NY 10458, USA
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper reports new data from both selling and buying versions of the Becker-DeGroot-Marschak (BDM) procedure. First, when using the selling version of BDM, the cross-sectional mean of CRRA risk preference parameter estimates shifts from a value consistent with “as if” risk-seeking behavior in the early baseline to a value closer to “as if” risk neutrality in the late baseline. Second, when using the buying version of BDM, the cross-sectional mean of CRRA risk preference parameter estimates does not appear to change over time in a statistically significant manner. The cross-sectional mean from the late baseline of the buying version of BDM is closer to “as if” risk neutrality and to the late baseline estimates from the selling version of BDM than it is to either early baseline estimates from the selling version of BDM or typical estimates from the first price auction. Use of dominated offers is correlated with deviations from “as if” risk neutrality; this suggests the possibility that the early deviations from “as if” risk neutrality reflect errors.

Keywords

RiskExpected utilityLearning

JEL classification

D80: General
Type
Research Article
Information
Experimental Economics , Volume 10 , Issue 2 , June 2007 , pp. 123 - 141
Copyright
Copyright © 2007 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Electronic Supplementary Material Supplementary material is available in the online version of this article at http://dx.doi.org/10.1007/s10683-006-9136-y.

References

Attiyeh, G., Franciosi, R., & Isaac, R. M. (2000). Experiments with the pivot process for providing public goods. Public Choice, 102, 95–114.CrossRefGoogle Scholar
Berg, J. E., Daley, L. A., Dickhaut, J. W., & O'Brien, J. R. (1986). Controlling preferences for lotteries on units of experimental exchange. Quarterly Journal of Economics, 101(2), 281–306.CrossRefGoogle Scholar
Berg, J. E., Dickhaut, J. W., & McCabe, K. (2005). Risk preference instability across institutions: a dilemma. Proceedings of the National Academy of Sciences, 102(11), 4209–4214.CrossRefGoogle ScholarPubMed
Cox, J. C., & Sadiraj, V. (2006). Small- and large-stakes risk aversion: implications of concavity calibration for decision theory. Games and Economic Behavior, 56, 45–60.CrossRefGoogle Scholar
Cox, J. C., Isaac, R. M., Cech, P., & Conn, D. (1996). Moral hazard and adverse selection in procurement contracting. Games and Economic Behavior, 17, 147–176.CrossRefGoogle Scholar
Cox, J. C., Roberson, B., & Smith, V. L. (1982). Theory and behavior of single object auctions. In Vernon, L. Smith (Ed.), Research in experimental economics, vol. 2. Greenwich, CT: JAI Press.Google Scholar
Cox, J. C., Smith, V. L., & Walker, J. L. (1988). Theory and individual behavior of first-price auctions. Journal of Risk and Uncertainty, 1, 61–99.CrossRefGoogle Scholar
Dorsey, R. E., & Razzolini, L. (2003). Explaining overbidding in first price auctions using controlled lotteries. Experimental Economics, 6, 123–140.CrossRefGoogle Scholar
Friedman, M. (1953). The methodology of positive economics. In Essays in positive economics. Chicago: University of Chicago Press.Google Scholar
Harlow, V., & Brown, K. (1990). Understanding and assessing financial risk tolerance: a biological perspective. Financial Analysts Journal, 80, 50–62.CrossRefGoogle Scholar
Harrison, G. W. (1990). Risk attitudes in first-price auction experiments: a Bayesian analysis. Review of Economics and Statistics, 72, 541–546.CrossRefGoogle Scholar
Isaac, R. M., & James, D. (2000). Just who are you calling risk averse? Journal of Risk and Uncertainty, 20(2), 177–187.CrossRefGoogle Scholar
Isaac, R. M. & James, D. (2000b). Robustness of the incentive compatible combinatorial auction. Experimental Economics, 3(1), 31–53.CrossRefGoogle Scholar
James, D., & Isaac, R. M. (2000). Asset markets: how they are affected by tournament incentives for individuals. American Economic Review, 90(4), 995–1004.CrossRefGoogle Scholar
Kachelmeier, S. J., & Shehata, M. (1992). Examining risk preferences under high monetary incentives: experimental evidence from the People's Republic of China. American Economic Review, 82(5), 1120–1141.Google Scholar
Rabin, M. (2000). Risk aversion and expected utility theory: A calibration theorem. Econometrica, 68, 1281–1292.CrossRefGoogle Scholar
Roth, A. E., & Malouf, M. (1979). Game-theoretic models and the role of information in bargaining. Psychological Review, 86, 574–594.CrossRefGoogle Scholar
Schorvitz, E. B (1998). Experimental tests of fundamental economic theories. Unpublished Ph.D. dissertation, University of Arizona.Google Scholar
Supplementary material: File

James supplementary material

James supplementary material
Download James supplementary material(File)
File 72.2 KB