Risk Attitudes and Impulsivity: an Investigation using Gamblers

Abstract:

The propensity to gamble is explained by behavioral psychology through impulsivity, defined as the inability to postpone an immediate gratification and represented by hyperbolic discounting. Strangely, however, little to no importance has been given to the attitudes towards risk, a cornerstone of economic and financial literature. This paper show that risk preferences are indeed an important determinant of disordered gambling, as they significantly correlate with the DSM scale and in particular with the DSM items that focus on the gambling behavior rather than on the emotional sphere of the subjects. In contrast, the severity of disordered gambling does not correlate with a proxy of hyperbolic discounting alone. This evidence also suggests that risk attitudes should also be taken into consideration in order to explain impulsive choices, which generally involves uncertain outcomes. The results of the experiment also show that a large fraction (more than 15%) of the subjects recruited in a betting agency should be classified as disordered gamblers.