Revisiting risk aversion: Can risk preferences change with experience?

- We show that Holt-Laury preferences are not stable over repetitions.
- In a laboratory experiment, subjects repeatedly make choices with feedback in the Holt-Laury task.
- We test whether subjects adjust their responses with experience and if so in which direction.
- We find that subjects move towards payoff maximization with experience.

The Holt-Laury measure for risk aversion has been used extensively in economic studies to measure individuals' risk aversion. The idea behind this measure is that individuals have stable risk preferences when making decisions under risk. We show that having repeated experiences with the Holt-Laury task can move individuals from exhibiting “risk aversion” to displaying “risk neutrality.” This finding suggests that either risk preferences are not robust to a few experiences or that responses to the tasks indicate something else. We show that a simple model of adaptation can capture this behavioral pattern.