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Free keywords:
Reinforcement learning, risk preferences, preference formation, experiment
JEL:
C91 - Laboratory, Individual Behavior
JEL:
D01 - Microeconomic Behavior: Underlying Principles
JEL:
D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Abstract:
Large, macroeconomic shocks in the past have been shown to influence economic decisions in the present. We study in an experiment with 743 subjects whether small-scale, seemingly negligible, events also affect the formation of risk preferences. In line with a reinforcement learning model, we find that subjects who won a random lottery took significantly more risk in a second lottery almost a year later. The same pattern emerges in another experiment with 136 subjects where the second lottery was played more than three years after the first lottery. So, small-scale, random, events affect the formation of risk preferences significantly.
