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Loving The Longshot: Risk Taking With Skewed Gambles, Philip Grossman, Catherine Eckel
Loving The Longshot: Risk Taking With Skewed Gambles, Philip Grossman, Catherine Eckel
Economics Seminar Series
To examine the effect of increased skewness on risk taking, we conduct controlled laboratory experiments. Our instrument is an adaption of the Eckel and Grossman (2002, 2008) risk measure (with six gamble choices). The Eckel and Grossman measure is a simplest, easy to understand, exercise that gives sufficient heterogeneity in choices while at the same time minimizing errors. Its simplicity also makes it easy to adapt. The adapted gamble choices are designed to have the same expected payoffs and risk as the original gamble choices, but to exhibit increasing degrees of right skewness. The adapted instrument is used to address …