Gender Based Risk Attitude - An Experimental Analysis

Abstract

This paper explores how risk taking attitude varies across men and women, using experimental economics techniques. Entrepreneurship is an art of undertaking risk, combining human and capital resources and transforming them into an innovative value added economic commodity. Most research and case studies reveal that women are more risk averse than men. But it is important to find out any systematic difference in their choices. Here, Lottery-Choice Experiments have been used to elicit information about underlying preferences of individuals. The experiment was conducted on both men and women, and their responses were recorded electronically. Our study reports inconsistencies on actual observed choices to general perception regarding investment decisions.A separate psychological questionnaire was designed to test their understanding and analyse their preferences towards such investment associated risk. A striking result was obtained, that the risk taking ability of the general population declines when the payoffs were scaled up, with the same amount of embedded probability. It was also observed that females are more sensitive to higher payoffs. That is, as payoff increases, their variability with different risk levels is more than proportionate to that of males. These findings can contribute to literature addressing risk and uncertainty that drive business decisions.