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Allais for the poor: Relations to ability, information processing, and risk attitudes
Ist Teil von
Journal of risk and uncertainty, 2017-04, Vol.54 (2), p.129-156
Ort / Verlag
New York: Springer
Erscheinungsjahr
2017
Link zum Volltext
Quelle
EBSCOhost Business Source Ultimate
Beschreibungen/Notizen
This paper complements evidence on the Allais paradox from advanced countries and educated people by a novel investigation in a poor rural area. The share of Allais-type behavior is indeed high and related to indicators of "lacking ability," such as poor education, unemployment, and little financial sophistication. Based on prospective reference theory, we extend these characteristics by biased processing of probabilistic information. Finally, we reveal that Allais-type behavior is linked to risk-related characteristics, such as risk tolerance and optimism. This indicates a potential problem as exactly the more dynamic among the poor tend to make inconsistent decisions under uncertainty.