How general are risk preferences? Choices under uncertainty in different domains
Author(s)Einav, Liran; Finkelstein, Amy; Pascu, Iuliana; Cullen, Mark R.
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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.
DepartmentMassachusetts Institute of Technology. Department of Economics
American Economic Review
American Economic Association
Einav, Liran et al. “How General Are Risk Preferences? Choices Under Uncertainty in Different Domains.” American Economic Review 102.6 (2012): 2606–2638. Web.
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