EXTERNAL SEMINAR JULY 9, 2013
Title: On the Stability of Risk Preferences of Children by Sex and Race
Authors: Marco Castillo (ICES, GMU), Jeffrey Jordan (University of Georgia), Ragan Petrie (ICES, GMU)
Abstract
We present evidence on the heterogeneity of risk preferences of children by sex and race and show that these differences might be driven more by framing rather than innate differences in risk attitudes. Specifically, we show that expressed preferences over identical risky prospects change depending on the frame in which they are presented, either relative to a sure payment or to a lottery. Fixing the reference payment/lottery not only erases differences across race but also reverse differences across sex. Under certain circumstances, boys behave significantly more risk aversely than girls. The variation in the choices across frames cannot be rationalized by expected utility theory, models of reference dependence or u-‐v type models of certain and uncertain payoffs. Cumulative prospect theory with compounding of lotteries could potentially explain the data, however, parametric estimates show that this theory cannot explain behavior across treatments without allowing for framing effects. Risky, or risk averse, behavior might be due to the frame in which decisions are presented. Interventions aimed at changing the decision environment might be particularly effective.
