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Stability of risk preference parameter estimates within the Becker-DeGroot-Marschak procedure

Published online by Cambridge University Press:  14 March 2025

Duncan James
Duncan James*
Affiliation:
Fordham University, Department of Economics, Bronx, NY 10458, USA
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Abstract

This paper reports new data from both selling and buying versions of the Becker-DeGroot-Marschak (BDM) procedure. First, when using the selling version of BDM, the cross-sectional mean of CRRA risk preference parameter estimates shifts from a value consistent with “as if” risk-seeking behavior in the early baseline to a value closer to “as if” risk neutrality in the late baseline. Second, when using the buying version of BDM, the cross-sectional mean of CRRA risk preference parameter estimates does not appear to change over time in a statistically significant manner. The cross-sectional mean from the late baseline of the buying version of BDM is closer to “as if” risk neutrality and to the late baseline estimates from the selling version of BDM than it is to either early baseline estimates from the selling version of BDM or typical estimates from the first price auction. Use of dominated offers is correlated with deviations from “as if” risk neutrality; this suggests the possibility that the early deviations from “as if” risk neutrality reflect errors.

Keywords

RiskExpected utilityLearning

JEL classification

D80: General

Information

Type
Research Article
Information
Experimental Economics , Volume 10 , Issue 2 , June 2007, pp. 123 - 141
Copyright
Copyright © 2007 Economic Science Association

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Footnotes

Electronic Supplementary Material Supplementary material is available in the online version of this article at http://dx.doi.org/10.1007/s10683-006-9136-y.

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