Assessing Individual Risk-Attitudes Using Field Data from Lottery Games

by

Connel Fullenkamp
Duke University,

Rafael Tenorio
DePaul University,

and

Robert Battalio
University of Notre Dame
 
 

Abstract

We use information from the television game show with the highest guaranteed average payoff in the U.S., Hoosier Millionaire, to analyze risk-taking in a high-stakes experiment. We first characterize gambling behavior under alternative assumptions about contestant rationality and preferences, and derive testable restrictions on individual risk-attitudes based on these assumptions. We then use an extensive sample of decisions in these games to estimate distributions of risk-aversion parameters that are consistent with the theoretical restrictions and revealed preferences. We find that although most contestants display risk averse preferences, the extent of the risk aversion varies substantially with the stakes involved in the different decisions.
 

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