Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301102 
Year of Publication: 
2024
Series/Report no.: 
Centre for Land Tenure Studies Working Paper No. 04/24
Publisher: 
Norwegian University of Life Sciences (NMBU), Centre for Land Tenure Studies (CLTS), Ås
Abstract: 
We investigate how random luck in repeated variants of the risky investment game of Gneezy, Leonard, and List (2009); Gneezy and Potters (1997) influences risk-taking and discounting behavior in future risky prospects with probabilistic payouts one week, six, 12, and 24 months into the future. We test non-parametrically whether luck enhances risk-taking and patience (reduces the discount rate) in risky prospects with delayed payouts. To investigate whether luck influences probability weighting (w(p) function), we estimate structural models with two-parameter Prelec probability weighting functions to decompose risk-taking in prospects with potential payouts six and 12 months into the future. We find that luck results in more optimistic (reduces the Prelec Ø parameter) and less non-linear (inverse-S-shaped) (increases the Prelec » parameter) w(p) function. We assess this for two samples from Malawi: one is a random sample of university students (n=721), and the other is a random sample (n=835) of rural subjects with limited education. The students were found to be more patient but had similar probability weighting functions.
Subjects: 
Luck
Discounting
Risk-taking
Probability weighting
JEL: 
C91
C93
D81
D84
D91
Persistent Identifier of the first edition: 
ISBN: 
978-82-7490-326-5
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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