Reconsidering Risk Aversion
By Daniel J. Benjamin, Mark Alan Fontana, Miles S. Kimball Risk aversion is typically inferred from real or hypothetical choices over risky lotteries, but such “untutored” choices may reflect mistakes rather than preferences. We develop a procedure to disentangle preferences from mistakes: after eliciting untutored choices, we confront participants with their choices that are inconsistent with expected-utility axioms (broken down enough to be self-evident) and allow them to reconsider their choices. We demonstrate this procedure via a survey about...