Scandinavian Working Papers in Economics
CLTS Working Papers,
Norwegian University of Life Sciences, Centre for Land Tenure Studies
No 4/24: Does luck make people more optimistic and patient? - Lessons from an experiment with students and rural subjects in Malawi
Stein T. Holden (), Sarah Ephrida Tione (), Mesfin Tilahun () and Samson Katengeza ()
Additional contact information
Stein T. Holden: Centre for Land Tenure Studies, Norwegian University of Life Sciences, Postal: Centre for Land Tenure Studies, Norwegian University of Life Sciences, P.O. Box 5003, NO-1432 Aas, Norway
Sarah Ephrida Tione: Centre for Land Tenure Studies, Norwegian University of Life Sciences, Postal: Centre for Land Tenure Studies, Norwegian University of Life Sciences, P.O. Box 5003, NO-1432 Aas
Mesfin Tilahun: Centre for Land Tenure Studies, Norwegian University of Life Sciences, Postal: Centre for Land Tenure Studies, Norwegian University of Life Sciences, P.O. Box 5003, NO-1432 Aas, Norway
Samson Katengeza: Centre for Land Tenure Studies, Norwegian University of Life Sciences, Postal: Centre for Land Tenure Studies, Norwegian University of Life Sciences, P.O. Box 5003, NO-1432 Aas, Norway
Abstract: We investigate how random luck in repeated variants of the risky investment game of Gneezy, Leonard, and List (2009); Gneezy and Potters (1997) influences risk-taking and discounting behavior in future risky prospects with probabilistic payouts one week, six, 12, and 24 months into the future. We test non-parametrically whether luck enhances risk-taking and patience (reduces the discount rate) in risky prospects with delayed payouts. To investigate whether luck influences probability weighting (w(p) function), we estimate structural models with two-parameter Prelec probability weighting functions to decompose risk-taking in prospects with potential payouts six and 12 months into the future. We find that luck results in more optimistic (reduces the Prelec β parameter) and less non-linear (inverse-S-shaped) (increases the Prelec α parameter) w(p) function. We assess this for two samples from Malawi: one is a random sample of university students (n=721), and the other is a random sample (n=835) of rural subjects with limited education. The students were found to be more patient but had similar probability weighting functions.
Keywords: Luck; Discounting; Risk-taking; Probability weighting
JEL-codes: C91; C93; D81; D84; D91
Language: English
29 pages, July 18, 2024
Full text files
CLTS_WP_04_24_full_pg.pdfFull text
Questions (including download problems) about the papers in this series should be directed to Sarah Ephrida Tione ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:nlsclt:2024_004This page generated on 2024-09-13 22:16:27.