The effect of background mood and pre-existing risk on risk and time preference

  • Rasa Lukoseviciute Rasa Lukoseviciute

Analysis of risk and time preferences is an important topic, risk aversion and time discounting affect important decisions, such as retirement savings, investment into human capital, choice of preventive healthcare, consumption and others. Risk and time preferences may not be only inherent but also dependent on ambient and some psychological characteristics. This thesis is analysing the effect of background mood, background risks and their interaction on risky and intertemporal choice. The preferences are analysed in the experiment which was conducted with the students of Tilburg University. The results show that mood and pre-existing risksdoes not have a significant effect on risk preferences but it does affect time preferences. The framing effect influences intertemporal choice between today and the future. For both, choice between today and the future, and between two future periods, joint effect of positive mood and broad framing appears to be significant.

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