TY  - JOUR
PY  - 2007//
TI  - Risk Aversion and Expected-Utility Theory: A Calibration Exercise
JO  - Journal of risk and uncertainty
A1  - Schechter, Laura
SP  - 67
EP  - 76
VL  - 35
IS  - 1
N2  - Rabin (Econometrica 68(5):1281-1292, 2000) argues that, under expected-utility, observed risk aversion over modest stakes implies extremely high risk aversion over large stakes. Cox and Sadiraj (Games Econom. Behav. 56(1):45-60, 2006) have replied that this is a problem of expected-utility of wealth, but that expected-utility of income does not share that problem. We combine experimental data on moderate-scale risky choices with survey data on income to estimate coefficients of relative risk aversion using expected-utility of consumption. Assuming individuals cannot save implies an average coefficient of relative risk aversion of 1.92. Assuming they can decide between consuming today and saving for the future, a realistic assumption, implies quadruple-digit coefficients. This gives empirical evidence for narrow bracketing.     <p>Language: en</p>
LA  - en
SN  - 0895-5646
UR  - http://dx.doi.org/10.1007/s11166-007-9017-6
ID  - ref1
ER  -