Experimental methods: Eliciting risk preferences

Economists and psychologists have developed a variety of experimental methodologies to elicit and assess individual risk attitudes. Choosing which to utilize, however, is largely dependent on the question one wants to answer, as well as the characteristics of the sample population. The goal of this paper is to present a series of prevailing methods for eliciting risk preferences and outline the advantages and disadvantages of each. We do not attempt to give a comprehensive account of all the methods or nuances of measuring risk, but rather to outline some advantages and disadvantages of different methods.

► We explore the merits and weaknesses of different mechanisms for risk elicitation. ► We describe experiments in economics and in psychology that use simple methods and price-list methods. ► We discuss the cost and benefit of various methods, urging researchers to take these into account.