Risky Choice in the Limelight

van den Assem, Martijn J.; Baltussen, Guido; van Dolder, Dennie

Abstract

This paper examines how risk behavior in the limelight differs from that in anonymity. In two separate experiments we find that subjects are more risk averse in the limelight. However, risky choices are similarly path dependent in the different treatments. Under both limelight and anonymous laboratory conditions, a simple prospect theory model with a path-dependent reference point provides a better explanation for subjects’ behavior than a flexible specification of expected utility theory. Additionally, our findings suggest that ambiguity aversion depends on being in the limelight, that passive experience has little effect on risk taking, and that reference points are determined by imperfectly updated expectations.

Citation

van den Assem, M. J., Baltussen, G., & van Dolder, D. (2016). Risky Choice in the Limelight. Review of Economics and Statistics, 98(2), 318-332. https://doi.org/10.1162/rest_a_00505

• Journal Article Type: Article
• Acceptance Date: Sep 24, 2014
• Online Publication Date: Apr 21, 2016
• Publication Date: 2016-05
• Deposit Date: Nov 17, 2015
• Journal: Review of Economics and Statistics
• Print ISSN: 0034-6535
• Electronic ISSN: 1530-9142
• Publisher: Massachusetts Institute of Technology Press
• Peer Reviewed: Peer Reviewed
• Volume: 98
• Issue: 2
• Pages: 318-332
• DOI: https://doi.org/10.1162/rest_a_00505
• Keywords: decision making under risk, risky choice, risk preferences, risk aversion, ambiguity aversion, limelight, accountability, public scrutiny, experience, game show, natural experiment, laboratory experiment, expected utility theory, prospect theory
• Public URL: https://nottingham-repository.worktribe.com/output/993327
• Publisher URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00505
• Related Public URLs: http://www.mitpressjournals.org/loi/rest
• Additional Information: This is the manuscript version of the article accepted for publication in Review of Economics and Statistics