How General Are Risk Preferences? Choices under Uncertainty in Different Domains
Liran Einav, Amy Finkelstein, Iuliana Pascu, Mark R. Cullen
American Economic Review · 2012 · Volume 102 · Issue 6
Abstract
We analyze the extent to which individuals' choices over five employer-provided insurance coverage decisions and one 401(k) investment decision exhibit systematic patterns, as would be implied by a general utility component of risk preferences. We provide evidence consistent with an important domain-general component that operates across all insurance choices. We find a considerably weaker relationship between one's insurance decisions and 401(k) asset allocation, although this relationship appears larger for more "financially sophisticated" individuals. Estimates from a stylized coverage choice model suggest that up to 30 percent of our sample makes choices that may be consistent across all 6 domains. (JEL D12, D14, D81, G22, J33)
Keywords
Consumer Economics: Empirical Analysis, Personal Finance, Criteria for Decision-Making under Risk and Uncertainty, Insurance, Insurance Companies, Compensation Packages, Payment Methods
Enable JavaScript for citation tools and additional paper interactions.