American Economic Review Vol. 102 No. 6 2012

How General Are Risk Preferences? Choices under Uncertainty in Different Domains

Liran Einav¹; Amy Finkelstein²; Iuliana Pascu³; Mark R. Cullen⁴

¹ Department of Economics, Stanford University, 579 Serra Mall, Stanford, CA 94305-6072, and NBER. · ² Department of Economics, MIT, 50 Memorial Drive, Cambridge, MA 02142-1347, and NBER. · ³ Department of Economics, MIT, 50 Memorial Drive, Cambridge, MA 02142-1347. · ⁴ Department of Internal Medicine, School of Medicine, Stanford University, 1265 Welch Road, Stanford, CA 94305-5414, and NBER.

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 thirty percent of our sample makes choices that may be consistent across all six domains.

DOI

10.1257/aer.102.6.2606

Volume

102

Issue

6

Pages

2606-2638

Language

en

Sources

openalex crossref bibtex:phds-export.bib

Cite

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