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Journal article
Attitudes Toward Uncertain Risks: Evidence from a Representative Survey
Journal of economic behavior & organization, v 240, 107351
Dec 2025
Featured in Collection : Research Supported by Drexel Libraries' OA Programs
Abstract
We survey a representative sample of US households to evaluate the impact of uncertainty on their willingness to insure against a potential loss. We document three main patterns: individuals switch from risk averse to risk loving as risks become more likely; individuals exhibit uncertainty aversion; and risk and uncertainty aversion are negatively correlated. We theoretically show the need for probability weighing to account for the switch from risk aversion to risk loving. We propose a generalization of recursive anticipated utility, which models uncertainty as a two-stage lottery and applies probability weighting to both stages, that can explain our data. We estimate the distribution of preferences in the population and find that most individuals overweigh small probabilities and underweigh large probabilities in both stages. We also suggest how to account for unobserved uncertainty when estimating preferences from insurance data.
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Details
- Title
- Attitudes Toward Uncertain Risks: Evidence from a Representative Survey
- Creators
- Amit Gandhi - University of PennsylvaniaAnya Samek - University of California San DiegoRicardo Serrano-Padial (Corresponding Author) - Drexel University, Economics (School of Economics)
- Publication Details
- Journal of economic behavior & organization, v 240, 107351
- Publisher
- Elsevier
- Number of pages
- 30
- Grant note
- Roybal grant: 5P30AG024962-12
We thank David Dillenberger, Ben Handel, Charlie Sprenger and audiences at Alicante, Penn, UCSD, NBER summer institute in IO and various conferences for comments. This paper was funded as part of a Roybal grant awarded to the University of Southern California, entitled "Roybal Center for Health Decision Making and Financial Independence in Old Age" (5P30AG024962-12) . The project in this paper relies on data from surveys administered by the Understanding America Study (UAS) , maintained by the Center for Economic and Social Research (CESR) at the University of Southern California. The opinions and conclusions expressed herein are solely those of the authors and do not represent the opinions or policy of any institution with which the authors are affiliated nor of USC, CESR or the UAS.
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:001631531900001
- Scopus ID
- 2-s2.0-105024857461
- Other Identifier
- 991022136865904721
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- Collaboration types
- Industry collaboration
- Domestic collaboration
- Web of Science research areas
- Economics