|This centre is a member of The LSE Research Laboratory [RLAB]: CASE | CEE | CEP | SERC | STICERD||Cookies?|
Paper No' DARP 070: | Full paper
Save Reference as: BibTeX File | EndNote Import File
Keywords: Inequality; risk, experiment, transfer principle, mean-preserving spread.
JEL Classification: C13; D63
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: Distributional Analysis Research Programme
Share this page: Google Bookmarks | Facebook | Twitter
Abstract:Building on previous studies on perceptions of inequality, welfare and risk we investigate the structure of individuals' rankings of uncertain prospects in terms of risk and their relationship to individual preferences. We examine three interlinked propositions that are fundamental to the standard economic approach to risk: (i) that rankings by risk are simply the reverse of ranking by preference over distributions with a given mean; (ii) that risk-rankings respect the principle of mean-preserving spreads; (iii) that risk-rankings are independent of whether the individual is personally involved in the gains/losses associated with the uncertain prospects. To do this we use a set of questionnaires implemented through the Virtual Laboratory, a novel experimental setting for the study of normative issues in experimental economics. The results from the questionnaires provide an evaluation of the similitude between individual perceptions of risk and theoretical axioms. They also help identify the individual characteristics that might affect such perceptions.
Copyright © RLAB & LSE 2003 - 2014 | LSE, Houghton Street, London WC2A 2AE | Contact: RLAB | Site updated 22 August 2014