Variation in Risk Seeking Behavior in a Natural Experiment on Large Losses Induced by a Natural Disaster
Data
16.07.2012
16.07.2012
Autori
Lionel Page, David Savage, Benno Torgler
Codice JEL
D03, D81, C93
D03, D81, C93
Parole chiave:
Decision under Risk, Large Losses, Natural Experiment
Decision under Risk, Large Losses, Natural Experiment
Publisher
Economy and Society
Economy and Society
Editor
Giuseppe Sammarco
Giuseppe Sammarco
This study explores people’s risk attitudes after having suffered large real-world losses following a natural disaster. Using the margins of the 2011 Australian floods (Brisbane) as a natural experimental setting, we find that homeowners who were victims of the floods and face large losses in property values are 50% more likely to opt for a risky gamble {a scratch card giving a small chance of a large gain ($500,000) {than for a sure amount of comparable value ($10). This finding is consistent with prospect theory predictions of the adoption of a risk-seeking attitude after a loss.