Journal
ECONOMIC JOURNAL
Volume 120, Issue 543, Pages 80-104Publisher
OXFORD UNIV PRESS
DOI: 10.1111/j.1468-0297.2009.02303.x
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We review experimental evidence collected from risky choice experiments using poor subjects in Ethiopia, India and Uganda. Using these data we estimate that just over 50% of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory. Our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately. However, when we allow both models to explain portions of the data simultaneously, we infer risk aversion for subjects behaving according to expected utility theory and risk-seeking behaviour for subjects behaving according to prospect theory.
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