RISK PREFERENCES IN SEQUENTIAL GAMBLING DECISIONS: A STUDY WITH BETTING GAMES WITH AND WITHOUT REQUIREMENT OF PREVIOUS EFFORT

In this chapter, we present the results of two studies involving a series of consecutive decisions in which subjects have the option to play a game or abstain from playing the game in order to maintain the status quo. Both studies are identical, but the second study incorporates the effort requirements to access risk options. According to the Prospect Theory, decisions are dependent on a reference value, and therefore, a subject’s preference for risk depends on whether the subject is in the gain or loss domain with respect to how the game’s outcome is perceived. However, in the case of concurrent decisions, the results obtained immediately prior could alter the relationship between the reference value and the subject’s attitude towards risk, creating a shift in the initial reference point. The results of the first study indicate that the initial endowment of the game is robust. Throughout the sequence of decisions, the endowment remains as a fixed reference point, which determines the risk preferences of the participants. However, in the second study, the effort requirements cause a change in the effect of the initial reference point. We interpret this effect as a change in the slope of the reference value curve.