# Risk Aversion When Gains Are Likely and Unlikely: Evidence from a Natural Experiment with Large Stakes - Zurich Open Repository and Archive

Blavatskyy, Pavlo R; Pogrebna, Ganna (2006). Risk Aversion When Gains Are Likely and Unlikely: Evidence from a Natural Experiment with Large Stakes. Working paper series / Institute for Empirical Research in Economics No. 278, University of Zurich.

## Abstract

In the television show Affari Tuoi a contestant is endowed with a sealed box containing anmonetary prize between one cent and half a million euros. In the course of the show the contestant learns more information about the distribution of possible monetary prizes inside her box. Consider two groups of contestants, who learned that the chances of their boxes containing a large prize are 20% and 80% correspondingly. Contestants in both groups receive qualitatively similar price offers for selling the content of their boxes. Ifncontestants are less risk averse when facing unlikely gains, the price offer is likely to benmore frequently rejected in the first group than in the second group. However, the fraction of rejections is virtually identical across two groups. Thus, contestants appear tonhave identical risk attitudes over (large) gains of low and high probability.

## Abstract

In the television show Affari Tuoi a contestant is endowed with a sealed box containing anmonetary prize between one cent and half a million euros. In the course of the show the contestant learns more information about the distribution of possible monetary prizes inside her box. Consider two groups of contestants, who learned that the chances of their boxes containing a large prize are 20% and 80% correspondingly. Contestants in both groups receive qualitatively similar price offers for selling the content of their boxes. Ifncontestants are less risk averse when facing unlikely gains, the price offer is likely to benmore frequently rejected in the first group than in the second group. However, the fraction of rejections is virtually identical across two groups. Thus, contestants appear tonhave identical risk attitudes over (large) gains of low and high probability.

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Item Type: Working Paper 03 Faculty of Economics > Department of Economics Working Paper Series > Institute for Empirical Research in Economics (former) 330 Economics English April 2006 29 Nov 2011 22:47 05 Apr 2017 23:14 Working paper series / Institute for Empirical Research in Economics 1424-0459 http://www.econ.uzh.ch/wp.html