Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey

By Thomas J. Dohmen, Armin Falk, David Hufiman, Uwe Sunde, Jürgen Schupp, Gert G. Wagner. Social Science Research Network, 2005

851 citations recorded by the source corpus.

This paper presents new evidence on the distribution of risk attitudes in the population, using a novel set of survey questions and a representative sample of roughly 22,000 individuals living in Germany. Using a question that asks about willingness to take risks in general, on an 11-point scale, we find evidence of heterogeneity across individuals, and show that willingness to take risks is negatively related to age and being female, and positively related to height and parental education. We test the behavioral relevance of this survey measure by conducting a complementary field experiment, based on a representative sample of 450 subjects, and find that the general risk question is a good predictor of actual risk-taking behavior. We then use a more standard lottery question to measure risk preferences in our sample of 22,000, and find similar results regarding heterogeneity and determinants of risk preferences, compared to the general risk question. The lottery question also makes it possible to estimate the coefficient of relative risk aversion for each individual in the sample. Using five questions about willingness to take risks in specific domains - car driving, financial matters, sports and leisure, career, and health - the paper also studies the impact of context on risk attitudes, finding a strong but imperfect correlation across contexts. Using data on a collection of risky behaviors from different contexts, including traffic offences, portfolio choice, smoking, occupational choice, participation in sports, and migration, the paper compares the predictive power of all of the risk measures. Strikingly, the general risk question predicts all behaviors whereas the standard lottery measure does not. The best predictor for any specific behavior is typically the corresponding context-specific measure.

Subfields: Applied Psychology, General Decision Sciences, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/88e8a0508abfe18e3260b97ee3db5b6de8514986

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Citations in the corpus

Risk attitudes of nascent entrepreneurs–new evidence from an experimentally validated survey (2009, background): “Dohmen et al. (2005) validated the reliability of these survey measures of risk attitudes with a field experiment.”
Why are some entrepreneurs more innovative than others? (2007, background): “What may actually be needed to test hypothesis 1 is an experimentally validated survey item that measures risk preferences, such as the one proposed by Dohmen et al. (2005). The inclusion of such a measure could be an interesting extension of the GEM survey.”
Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure (2008, methodology): “Dohmen et al. (2005) found that risk tolerance variables defined by questions on self-reported willingness to take risks in one’s career, in sports, in car driving, etc., had significant correlations 18 averaging 0.52.”
Personality and marital surplus (2012, neutral): “In summary, men in the older cohort who marry by age 35 have a trait profile that is related to earnings power rather than interpersonal connection, compared to unmarried men.”
Eliciting risk preferences: When is simple better? (2010, background): “Conversely, younger persons (especially males) may tend to be more willing to take on risks (e.g., Dohmen, et al., 2006).”
Experimentally Validated Survey Evidence on Individual Risk Attitudes in Rural Thailand (2013, background): “(2010) directly link survey and highly-incentivized experiments to the same persons, however, three years lie in between survey (2002) and experiment (2005). Moreover, they consider only few socio-economic control variables. Finally, there are two other recent studies building on Dohmen at al. (2011”
Entrepreneurial personality: The role of narcissism (2013, methodology): “We measured risk-taking attitude with the instrument developed by Dohmen et al. (2005).”
Tourism Risk and Uncertainty (2015, background): “…trait exists, making individuals consistently risk averse across all or most arenas of activity, such as driving or drinking (Barsky et al. 1997; Dohmen et al. 2005), or whether risk tolerance is domain specific because individuals having different competences to manage risks in particular…”