The effect of small-scale changes in wealth on risk attitudes: an experimental study

Purpose This study aims to examine the effects of prior small-scale changes wealth on subsequent risky choices. Design/methodology/approach The paper opted for a laboratory experiment in which subjects perform two sequences tasks. In between these sets, author transfers money real randomly selected half subjects. Data choices before and after transfer are used estimate risk attitudes analyze whether affected risk. Findings finds that gain does not change subjects' preferences – neither within- nor between-subject design. suggests individuals' consistent with their constant absolute (CARA) aversion preferences, result supports key assumption recent literature calibration critique decision theories view individuals engage narrow framing. Research limitations/implications Because relatively small money, research results may lack generalizability. Practical implications includes reference-dependent other explain how outcomes affect risk-taking behavior sequential problems. Social relevant community studying as shed new light well-known put forward by seminal Thaler. Originality/value fills an identified gap is need test house-money effect more realistic setting (over repeated risk-elicitation tasks, given outside lotteries within-subject design).