The Effect of Fast and Slow Decisions on Financial Risk Taking
Journal article, Peer reviewed
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Original versionJournal of Risk and Uncertainty. 2017, 54 (1), 37-59. 10.1007/s11166-017-9252-4
We experimentally compare fast and slow decisions in a series of Experiments on financial risk taking in three countries involving over 1700 subjects. To manipulate fast and slow decisions, subjects were randomly allocated to responding within 7 Seconds (time pressure) or waiting for at least 7 or 20 seconds (time delay) before responding. To control for different effects of time pressure and time delay on measurement noise, we estimate separate parameters for noise and risk preferences within a random utility framework. We find that time pressure increases risk aversion for gains and risk taking for losses compared to time delay, implying that time pressure increases the reflection effect of Prospect Theory. The results for gains are weaker and less robust than the results.