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In this comment on Callen et al. (2014), I revisit recent evidence uncovering a "preference for certainty" in violation of dominant normative and descriptive theories of decision-making under risk. I show that the empirical findings are potentially confounded by systematic noise. I then develop choice lists that allow me to disentangle these different explanations. Experimental results obtained with these lists reject explanations based on a preference for certainty in favor of explanations based on random choice. From a theoretical point of view, the levels of risk aversion detected in the choice list involving certainty can be accounted for by prospect theory through reference dependence activated by salient outcomes. (JEL C91, D12, D74, D81, O12, O17)

"Prospect Theory and Political Decision Making" published on by Oxford University Press.

Abstract
We present incentivised panel data measuring risk preferences of subsistence farmers from across Ethiopia and pair them with rainfall data. We use these data to test the hypothesis that risk preferences may adapt to the environment of the decision maker. We find that rainfall shocks decrease risk tolerance for the same individuals over time. We also find that historical rainfall characteristics and geographical features can explain 40% of the variation in preferences across individuals. The time-changing effects are perfectly aligned with the geographical effects we document, painting a unified and highly coherent picture. This provides the first real-world evidence that preferences may systematically adapt to the environment of the decision maker.

We test the effect of stake size on ambiguity attitudes. Compared to a baseline condition, we find subjects to be more ambiguity seeking for small-probability gains and large-probability losses under high stakes. They are also more ambiguity averse for large-probability gains and small-probability losses. We trace these effects back to stake effects on decisions under risk (known probabilities) and uncertainty (unknown probabilities). For risk, we replicate previous findings. For uncertainty, we find an increase in probabilistic insensitivity under high stakes that is driven by increased uncertainty aversion for large-probability gains and for small-probability losses.

Die Bundesregierung hat beschlossen, den Primärenergiebedarf von Gebäuden bis 2050 um 80 % zu senken. Dazu muss die energetische Sanierungsrate von derzeit 0,8 % auf 2,0 % pro Jahr gesteigert werden. Um festzustellen, wie durch neue und bestehende Politikinstrumente diese Steigerung der Sanierungsrate erreicht werden kann, untersucht die vorliegenden Studie den Prozess der Entschei-dungsfindung den Eigentümer von Ein- und Zweifamilienhäuser für eine Sanierungsentscheidung durchlaufen. Sie basiert auf der Befragung von 2.000 Haushalten, die nach dem Stand ihrer Entscheidungsfindung in drei Kategorien unterteilt wurden: 1. Haushalte, die noch keine Sanierung vorgenommen haben oder planen, 2. Haushalte, die innerhalb der nächsten zwei Jahre eine Sanierung planen, und 3. Haushalte, die innerhalb der letzten fünf Jahre eine Sanierung durchgeführt haben.

The German government is committed to reducing the primary energy demand of buildings by 80% by 2050. This requires increasing the rate of thermal retrofits from the current 0.8% to 2.0% per year. To explore how new and existing policies and programs could deliver the increased retrofit rate, this paper examines the thermal efficiency retrofit decision-making process among owners of single- and two-family homes. It is based on a survey of 2,000 households that have been divided into three categories based on where they were in the retrofit decision process: 1. Households that have neither implemented nor are planning a retrofit; 2. Households that are planning a retrofit within the next two years; and 3. Households that have implemented a retrofit within the last five years. ; Die Bundesregierung hat beschlossen, den Primärenergiebedarf von Gebäuden bis 2050 um 80 % zu senken. Dazu muss die energetische Sanierungsrate von derzeit 0,8 % auf 2,0 % pro Jahr gesteigert werden. Um festzustellen, wie durch neue und bestehende Politikinstrumente diese Steigerung der Sanierungsrate erreicht werden kann, untersucht die vorliegenden Studie den Prozess der Entschei-dungsfindung den Eigentümer von Ein- und Zweifamilienhäuser für eine Sanierungsentscheidung durchlaufen. Sie basiert auf der Befragung von 2.000 Haushalten, die nach dem Stand ihrer Entscheidungsfindung in drei Kategorien unterteilt wurden: 1. Haushalte, die noch keine Sanierung vorgenommen haben oder planen, 2. Haushalte, die innerhalb der nächsten zwei Jahre eine Sanierung planen, und 3. Haushalte, die innerhalb der letzten fünf Jahre eine Sanierung durchgeführt haben.

We explore situations in which a decision-maker bears responsibility for somebody else's outcomes as well as for her own. For gains we confirm the intuition that being responsible for somebody else's payoffs increases risk aversion, while in the loss domain we find increased risk seeking. In a second experiment we replicate the finding of increased risk aversion for large probabilities of a gain, while for small probability gains we find an increase of risk seeking under conditions of responsibility. This discredits hypotheses of a cautious shift under responsibility, and indicates an accentuation of the fourfold pattern of risk attitudes usually found for individual choices. (author's abstract)

We measure risk attitudes in 30 different countries in a controlled, incentivized experiment (N = 3025). At the macroeconomic level, we find a strong and highly significant negative correlation between the risk tolerance of a country and income per capita. This gives rise to a paradox, seen that risk tolerance has been found to be positively associated with personal income within countries. We show that this paradox can be explained by unified growth theory. These results are consistent with the prediction that risk attitudes act as a transmission mechanism for growth by encouraging entrepreneurship. Furthermore, our study shows that risk attitudes vary considerably between countries and that for typical experimental stakes, risk seeking or neutrality is just as frequent as risk aversion. (author's abstract)

Prospect theory (PT) is the dominant descriptive theory of decision making under risk today. For the modeling of choices, PT relies on a psychologically founded separation of risk attitudes into attitudes towards outcomes, captured in a value function; and attitudes towards probabilities, captured in a probability weighting function. However, while it is theoretically sound, it is unclear whether this clear separation is reflected in actual choices. To test this, we designed two experiments. In the first experiment, we elicit the value and probability weighting functions both under known and unknown probabilities. The results support PT and show that the value function is unaffected by the nature of the probabilities, which only affects probability weighting. More in general, this finding supports theories that represent ambiguity attitudes through probability transformations rather than utility transformations. In the second experiment, we examine the effects of an increase in stakes on risk attitudes. We find that the stake increase is not reflected in the value function, but rather in the weighting function, thus contradicting PT's prediction. (author's abstract)