Risk aversion: an experiment with self-employed workers and salaried workers

Abstract

In this article we present the results of a lottery-choice experiment to address the following questions: Do risk vary across individuals? What is the impact of context on risk aversion? The originality of this research lies in introducing variability in socio-demographic characteristics by recruiting not only students but also ‘real people’ among salaried workers and self-employed workers. Our results indicate that risk attitude strongly varies across individuals. In particular, individuals who are self employed tend to be significantly less risk averse than others. In addition, we replicated Holt and Laury (2002, 2005) and Harrison et al. (2005)’s findings that individuals tend to be more risk averse with higher payoffs. Finally, our results concerning a potential experience effect indicate the existence of a significant order effect for both treatments.

Acknowledgements

This article has benefited from useful comments from participants at the 2005 North American Economic Science Association Meeting in Tucson. We are also grateful to E. Priour for programming the experiment presented in this article and to Pierre-Jean Richard and the Chamber of Commerce of Rennes for recruiting self-employed participants.

Notes

¹ As Harrison and List (2004) noted, these last years, several experimenters have deliberately left their reservation: more and more experimentalists are recruiting subjects in the field rather than in the classroom. For example Smith et al. (1988) conducted a large series of experiments with student subjects but also with professional and business people from the Tucson community, as subjects. Another example are the experiments of Cummings et al. (1995), who used individuals recruited from churches in order to obtain a wider range of demographic characteristics than one would obtain in the standard college setting.