Economics Stack Exchange Archive

Estimating risk parameters from observed choices

• posted by: o.k. on 2012-02-14
• tagged: microeconomics, risk, experimental-economics
• score: 2

My background is in labor economics/applied micro but I am currently working with data collected from a field experiment. My experimental/micro skills are rusty to say the least.

In my data, I observe individuals choosing one of the choices $A, B, C, D$. The value of the choice is realized after the choice. I know that

$E(A) <= E(B) <= E(C) <= E(D)$ $VAR(A) <= VAR(B) <= VAR(C) <= VAR(D)$

If I assume that $A, B, C, D$ are continuous, independent and normally distributed and individuals are aware of expected payoffs $E(i)$ and variances $VAR(i)$.

• Is there a way to estimate a expected risk aversion parameter (e.g. CRRA) for a group of people?
• Would it make sense to compare these risk estimates from two groups of people, say men and women or high educated and low educated?

I would appreciate if you guys could come up with some relevant literature.

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