Antonio Filippin (University of Milan)
Domenico Massaro
The model of Khaw et al. (2021) rationalizes by means of cognitive imprecision the main regularities found in experimental measures of risk preferences, including two well-known problems: i) instability of choices; ii) risk aversion measured with small stakes implies absurdly high levels of risk aversion with large stakes. We provide an experimental test of Khaw et al. (2021) investigating whether choices react in the predicted manner to an exogenous manipulation of the cognitive load. Moreover, we investigate whether the behavior typically observed in small-stake decisions can be attributed solely to cognitive imprecision or whether genuine risk aversion maintains a significant role.