The Reflection Effect and Fourfold Pattern of Risk Attitudes : A Structural Econometric Analysis

The reflection effect and fourfold pattern of risk attitudes are often thought to be stylized facts about decision making under risk in lab settings. We take a closer look at this received wisdom, using 5 existing data sets from pairwise lottery choice experiments with real monetary incentives. We apply a structural econometric model that allows for within-individual correlation in risk preferences across gain and loss domains, as well as unobserved preference heterogeneity across individuals. The estimates of utility and probability weighting functions do not support the received wisdom