Original source: SimoleonSense.com .
Click Here To Read: Why do people ‘play the longshot’ and buy insurance – It’s in our genes
H/T Money Science
Why do some people like to take risks by playing “longshot” payoffs while, on the other hand, taking the opposite tack by buying insurance to reduce risks? A team of economists and molecular geneticists from the Hebrew University of Jerusalem and two Asian universities say the answer can be found in our genetic makeup.
The team set out to tackle the long-standing question in economic theory as to why people tend to be risk-preferring when facing longshot risks involving significant gains, such as betting on race horses, and on the other hand are risk averse when facing significant losses — buying home or car insurance, for instance.
Many economists have struggled with this paradox, says Richard Ebstein, the Sylvia Scheinfeld Professor of Human Genetics at the Hebrew University of Jerusalem, who has probed this subject along with economists Prof. Soo Hong Chew of the National University of Singapore (NUS) and Dr. Songfa Zhong of NUS and the Hong Kong University of Science and Technology.
Abstract (Via MoneyScience)
Decision making often entails longshot risks involving a small chance of receiving a substantial outcome. People tend to be risk preferring (averse) when facing longshot risks involving significant gains (losses). This differentiation towards longshot risks underpins the markets for lottery as well as for insurance. Both lottery and insurance have emerged since ancient times and continue to play a useful role in the modern economy. In this study, we observe subjects’ incentivized choices in a controlled laboratory setting, and investigate their association with a widely studied, promoter-region repeat functional polymorphism in monoamine oxidase A gene (MAOA). We find that subjects with the high activity (4-repeat) allele are characterized by a preference for the longshot lottery and also less insurance purchasing than subjects with the low activity (3-repeat) allele. This is the first result to link attitude towards longshot risks to a specific gene. It complements recent findings on the neurobiological basis of economic risk taking.
Click Here To Read: Why do people ‘play the longshot’ and buy insurance – It’s in our genes
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