The Formation of Risk Preferences Through Small-Scale Events

Angerer, Silvia; Dutcher, E. Glenn; Glätzle-Rützler, Daniela; Lergetporer, Philipp; Sutter, Matthias

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The Formation of Risk Preferences Through Small-Scale Events

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Sutter, Matthias
Max Planck Institute for Research on Collective Goods, Max Planck Society;

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Citation

Angerer, S., Dutcher, E. G., Glätzle-Rützler, D., Lergetporer, P., & Sutter, M. (2021). The Formation of Risk Preferences Through Small-Scale Events.

Cite as: https://hdl.handle.net/21.11116/0000-0009-0D34-F

Abstract

Large, macroeconomic shocks in the past have been shown to influence economic decisions in the present. We study in an experiment with 743 subjects whether small-scale, seemingly negligible, events also affect the formation of risk preferences. In line with a reinforcement learning model, we find that subjects who won a random lottery took significantly more risk in a second lottery almost a year later. The same pattern emerges in another experiment with 136 subjects where the second lottery was played more than three years after the first lottery. So, small-scale, random, events affect the formation of risk preferences significantly.