{"title":"Modeling Preference Heterogeneity Within and Across Behavioral Types: Evidence from a Real-world Betting Market","authors":"Angie Andrikogiannopoulou, Filippos Papakonstantinou","doi":"10.2139/ssrn.2239194","DOIUrl":null,"url":null,"abstract":"While it is commonly accepted that risk preferences differ across individuals, studies that estimate them typically allow for limited heterogeneity. We develop a methodology that allows for richer representation of heterogeneity both within and across utility types characterized by different behavioral features. This enables us to improve individual- and population-level estimates, and to assess the relative importance of loss aversion and probability weighting, and their prevalence in the population. Applying our model to individual sports-betting choices, we find that utility curvature alone does not explain observed choices and, while two-thirds of individuals exhibit loss aversion, all exhibit probability weighting.","PeriodicalId":11837,"journal":{"name":"ERN: Other IO: Empirical Studies of Firms & Markets (Topic)","volume":null,"pages":null},"PeriodicalIF":0.0000,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"24","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"ERN: Other IO: Empirical Studies of Firms & Markets (Topic)","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.2239194","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 24
Abstract
While it is commonly accepted that risk preferences differ across individuals, studies that estimate them typically allow for limited heterogeneity. We develop a methodology that allows for richer representation of heterogeneity both within and across utility types characterized by different behavioral features. This enables us to improve individual- and population-level estimates, and to assess the relative importance of loss aversion and probability weighting, and their prevalence in the population. Applying our model to individual sports-betting choices, we find that utility curvature alone does not explain observed choices and, while two-thirds of individuals exhibit loss aversion, all exhibit probability weighting.