Working Paper: CEPR ID: DP8868
Authors: Alison L. Booth; Patrick Nolen
Abstract: Risk theories typically assume individuals make risky choices using probability weights that differ from objective probabilities. Recent theories suggest that probability weights vary depending on which portion of a risky environment is made salient. Using experimental data we show that salience affects young men and women differently, even after controlling for cognitive and non-cognitive skills. Men are significantly more likely than women to switch from a certain to a risky choice once the upside of winning is made salient, even though the expected value of the choice remains the same.
Keywords: cognitive ability; gender; probability weights; risk aversion
JEL Codes: D8; D81; J16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| salience (D91) | risky choices (men) (D81) |
| salience (D91) | risky choices (women) (D91) |
| gender (J16) | susceptibility to salience (D91) |
| cognitive ability (IQ) (G53) | decision-making (D70) |
| salience + gender (J16) | switching choices (C34) |