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Free keywords:
Reinforcement learning, risk preferences, preference formation, memories, experiment
JEL:
C91 - Laboratory, Individual Behavior
JEL:
D01 - Microeconomic Behavior: Underlying Principles
JEL:
D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Abstract:
Understanding how humans deal with risk is important, as it prevails in practically all dimensions of life. Large, macroeconomic shocks have been shown to influence risk-taking. We study in an experiment with 759 subjects whether small-scale, seemingly negligible, events also affect the formation of risk preferences. In line with a reinforcement learning framework, we find that subjects who won a random lottery took significantly more risk in a second lottery almost a year later. So, small-scale, random, events significantly affect the formation of risk preferences, while we also show that memories don’t matter.
