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The effect of fast and slow decisions on risk taking
University of Innsbruck, Austria; University of Gothenburg, Sweden.
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.
University of Innsbruck, Austria.
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences. Stockholm School Econ, Sweden.
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2017 (English)In: Journal of Risk and Uncertainty, ISSN 0895-5646, E-ISSN 1573-0476, Vol. 54, no 1, 37-59 p.Article in journal (Refereed) Published
Abstract [en]

We experimentally compare fast and slow decisions in a series of experiments on financial risk taking in three countries involving over 1700 subjects. To manipulate fast and slow decisions, subjects were randomly allocated to responding within 7 seconds (time pressure) or waiting for at least 7 or 20 seconds (time delay) before responding. To control for different effects of time pressure and time delay on measurement noise, we estimate separate parameters for noise and risk preferences within a random utility framework. We find that time pressure increases risk aversion for gains and risk taking for losses compared to time delay, implying that time pressure increases the reflection effect of Prospect Theory. The results for gains are weaker and less robust than the results for losses. We find no significant difference between time pressure and time delay for loss aversion (tested in only one of the experiments). Time delay also leads to less measurement noise than time pressure and unconstrained decisions, and appears to be an effective way of decreasing noise in experiments.

Place, publisher, year, edition, pages
SPRINGER , 2017. Vol. 54, no 1, 37-59 p.
Keyword [en]
Prospect Theory; Experimental economics; Time pressure; Measurement noise
National Category
Economics
Identifiers
URN: urn:nbn:se:liu:diva-139305DOI: 10.1007/s11166-017-9252-4ISI: 000403691200003OAI: oai:DiVA.org:liu-139305DiVA: diva2:1120952
Note

Funding Agencies|Austrian Science Fund FWF (START-grant) [ZFP220400, Y617-G11, SFB F63]; Ragnar Soderberg, Jan Wallander and Tom Hedelius Foundation; Swedish Council for Working Life and Social Research

Available from: 2017-07-07 Created: 2017-07-07 Last updated: 2017-08-27

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Citation style
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  • Other locale
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