Document Type
Article
Publication Date
6-1-2025
Abstract
Classical theories of risky choice posit that risk preferences are stable across decision contexts. Broadly speaking, there are two branches of empirical literature on the stability hypothesis. The first branch takes a structural approach and examines the within-person consistency of model-based estimates of risk aversion across contexts. A second branch takes a “model-free” approach and investigates the within-person correlation of risky choices across contexts. We contribute to the stability literature in two related ways. First, we elucidate the latent structure of the model-free approach. Second, we develop a new approach that relies on the same structural assumptions but which is more powerful and with which we can partially identify features of stability and heterogeneity of risk preferences in the population. Our approach to the problem of learning about the stability of risk preferences provides an in-depth example of a more general methodological point: partial identification through minimal, nonparametric assumptions grounded in economic theory offers a robust middle ground between fully structural and model-free approaches.
Scholarly Commons Citation
Barseghyan, Levon; Molinari, Francesca; and Teitelbaum, Joshua C., "Learning about Stability of Risk Preferences" (2025). Georgetown Law Faculty Publications and Other Works. 2667.
https://scholarship.law.georgetown.edu/facpub/2667