Measuring Individual Risk-Related Preferences

Abstract

Recent microeconomic developments in the study of uncertainty have increased the number of individual preference parameters risk aversion, prudence, temperance, loss aversion, etc. to cover it. Based on a specific questionnaire put to a sub-sample of the 1998 INSEE Patrimoine survey on personal wealth, we paradoxically propose measuring this profusion of individual attitudes to risk using a single, ordinal indicator: we produce a score as a summary measure supposed representative of the range of these preferences with regard to risk. The score information suggests that young people, single people, men, high wage earners and children of well-off self-employed professionals or non-teaching executives are prepared to take greater risks than the others. Seniors, couples, women, the least qualified, and children of prudent, manual employee and farmer parents tend to take fewer risks. The age- and gender-related findings were common to all the indicators.Risk Aversion, Discounted Utility, Non Expected Utility, Life Cycle Models