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Are Collective Risk Preferences More Risk Neutral Than Individual Risk Preferences An Experiment In Small Groups
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Book Synopsis Are Collective Risk Preferences More Risk Neutral Than Individual Risk Preferences? An Experiment in Small Groups by : Nobuyuki Ito
Download or read book Are Collective Risk Preferences More Risk Neutral Than Individual Risk Preferences? An Experiment in Small Groups written by Nobuyuki Ito and published by . This book was released on 2019 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we investigate the changes in risk attitudes and risk perceptions that occur while collective risk preferences are formed. Data on risk attitudes and risk perceptions were collected in lottery choice experiments. The subjects participated in individual choice tasks and group choice tasks. The observed choice data are analyzed by using a structural estimation approach. The behavioral models used for structural estimation are based on expected utility theory (EUT), prospect theory (PT) and model parameters. The superiority of the models is also examined. The results of the structural estimations show that 1) overall, the PT specifications are superior to the EUT specifications, 2) regardless of whether the participants are male or female, there are no significant disparities between the subjective and objective risks in the individual and group decisions, 3) risk attitudes become more risk-loving (and closer to risk neutral) during the process of forming collective risk preferences, 4) the switching phenomena that occur during Holt and Laury's experiment with lottery pairs can be explained only by changes in risk attitudes, which are independent of the riskiness of lotteries, and 5) these results are obtained regardless of the majority or the unanimous agreement rules.
Book Synopsis Are Risk Preferences Time-Dependent? Looking Ahead, a Group Has a Stronger Effect Than the Average of Its Individual Members by : Marie-Louise Matthiesen
Download or read book Are Risk Preferences Time-Dependent? Looking Ahead, a Group Has a Stronger Effect Than the Average of Its Individual Members written by Marie-Louise Matthiesen and published by . This book was released on 2016 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether individual and group risk preferences are dependent on reward delay. To do so, we run a lottery-choice experiment, where payments are made either directly or in 3, 9, or 18 months after the experiment. We find that risk preference is time-dependent for both individuals and groups. In the present, groups make more risk-averse decisions than individuals do. As soon as decisions materialize in the future, this relation reverses, with groups becoming less risk-averse in their decisions and reaching almost risk neutrality at 18 months. Both, individuals and groups, do not significantly differ in their risk preferences between the different delays. We present a parameterization of the probability time trade-off model extended by the probability of prospect survival and show that our results are consistent with the affect-based reasoning explanation.
Book Synopsis Risk Aversion in Experiments by : G.W. Harrison
Download or read book Risk Aversion in Experiments written by G.W. Harrison and published by Emerald Group Publishing. This book was released on 2008-02-29 with total page 450 pages. Available in PDF, EPUB and Kindle. Book excerpt: Presents research utilizing laboratory experimental methods in economics.
Book Synopsis Decision Process, Preferences Over Risk and Consensus Rule by : Andrea Morone
Download or read book Decision Process, Preferences Over Risk and Consensus Rule written by Andrea Morone and published by . This book was released on 2017 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent literature on individual vs. group decisions over risk has brought about divergent results, mainly depending on the institutional rules through which groups take decisions. While some studies where group decisions relied on the majority rule showed no appreciable difference between individuals and groups' preferences, others where unanimity among group members was required found collective decisions to be less risk averse than individual ones. Of course, these studies share the imposition of a choice rule to determine the groups' outcome. Alternatively, in the study at hand, we elicited groups' preferences over risk using a consensus rule, i.e. leaving groups free to endogenously solve the potential disagreement among their members, just as in many real life instances. Our results from a logit regression unambiguously show that individuals' preferences are systematically further from the risk neutrality than those of groups. In particular, individuals are more risk seeker than groups when facing gambles with positive expected payoff difference and more risk averse in the opposite case.
Book Synopsis Intertemporal Choice and Its Anomalies by : Salvador Cruz Rambaud
Download or read book Intertemporal Choice and Its Anomalies written by Salvador Cruz Rambaud and published by Frontiers Media SA. This book was released on 2019-08-16 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Research Topic of the journals Frontiers in Applied Mathematics and Statistics and Frontiers in Psychology on “Intertemporal choice and its anomalies” has collected ten manuscripts on several fields, which demonstrates that this topic is of interest for many important research activities outside of traditional domains of economics and finance. In effect, the concepts of time preference, rationality and time-inconsistency in intertemporal choice can be applied to a wide variety of social problems such as addictions, retirement plans, and health, among others. On the other hand, the main anomalies or paradoxes in intertemporal choice (such as delay effect, sign effect, magnitude effect, delay-speedup asymmetry, and sequence effect) have been considered, as manifestations of many problematic behaviors of self-control in intertemporal choice.
Book Synopsis Comparing Risk Preferences in Choices for Self and Others by : Pavel D. Atanasov
Download or read book Comparing Risk Preferences in Choices for Self and Others written by Pavel D. Atanasov and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The current experiment compares risk preference in choices for self and others. The experimental task is based on Holt & Laury (2002) Multiple Price List paradigm. Participants chose among ten sets of gambles. Their choices affected either themselves or other participants in matched reciprocal pairs. Gain and Loss framing varied whether the outcomes of gambles were entirely in the gain domain or if prospects included potential losses. Payoffs are determined based on choices as well as two transparently random numbers, sourced from instant state lottery tickets. Choices for others tended to be somewhat more risk-averse than choices for self. The difference was not significant, although choices for self were significantly risk-averse while choices for others were approximately risk-neutral. Anticipated feedback from recipients also decreased risk taking, although not by a significant margin. Additional studies are proposed to isolate the role of potential losses in choices for and others under uncertainty.
Book Synopsis Are Individuals More Risk and Ambiguity Averse in a Group Environment Or Alone? Results from an Experimental Study by : Brunette Marielle
Download or read book Are Individuals More Risk and Ambiguity Averse in a Group Environment Or Alone? Results from an Experimental Study written by Brunette Marielle and published by . This book was released on 2016 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most decision-making research in economics focuses on individual decisions. Yet, we know, from psychological research in particular, that individual preferences can be sensitive to social pressures. In this paper, we study the impact of a group environment on individual preferences for risky (i.e., known probabilities) and ambiguous (i.e., unknown probabilities) prospects. In our experiment, each participant was invited to make a series of lottery-choice decisions in two different conditions. In the Alone condition, individuals made private choices whereas in the Group condition, individuals belonged to a three-person group and group-members' choices were aggregated according to either a majority or unanimity rule. This design allows us to study the impact of a group environment on individuals' attitude towards both risky and ambiguous prospects while controlling for the decision rule used in the group. Our experimental results show that when individuals are in the Group condition, they tend to be less risk averse and more ambiguity averse than when they are not part of a group (Alone condition). Our experiment also suggests that the decision rule matters as it shows that these two trends tend to be stronger when the group implements a unanimity rule. Specifically, we found that individuals who belong to a group implementing a unanimity rule are significantly less risk averse than individuals who belong to a group that relies on the majority rule. We obtained a similar - but non-significant - result under ambiguity.
Book Synopsis Risk Preferences, Cognitive Ability and Personality by : Yue Bao
Download or read book Risk Preferences, Cognitive Ability and Personality written by Yue Bao and published by LAP Lambert Academic Publishing. This book was released on 2013 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk aversion is the reluctance of a subject who value a certain gain higher than a risky gain, when both have the same expected value, and loss aversion refers to the tendency for a subject dislike a loss more than they favor a gain of the same expected value. This book investigates whether Danes are in general risk and loss averse, and test whether risk and loss aversion are related to cognitive ability, certain personality traits, and some demographics. Key findings: 1) Risk and loss aversion is a realistic characterization of average subjects; 2) The likelihood of being risk averse is affected negatively by background variables such as high salary, high education, and high cognitive reflection ability. However, IQ scores are not significantly related to risk aversion; 3) The possibility of displaying a high degree of risk aversion increases with age; 4) The possibility of being loss averse decreases with increase in salary and age, and it seems no cognitive ability measure is correlated to loss aversion.
Book Synopsis Models of Risk Preferences by : Glenn W. Harrison
Download or read book Models of Risk Preferences written by Glenn W. Harrison and published by Emerald Group Publishing. This book was released on 2023-10-23 with total page 291 pages. Available in PDF, EPUB and Kindle. Book excerpt: Models of Risk Preferences collects studies that critically review alternatives to Expected Utility Theory from the perspective of experimental economics.
Book Synopsis Higher-Order Risk Preferences in Social Settings by : Timo Heinrich
Download or read book Higher-Order Risk Preferences in Social Settings written by Timo Heinrich and published by . This book was released on 2015 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study higher-order risk preferences, i.e. prudence and temperance, next to risk aversion in social settings. Previous experimental studies have shown that higher-order risk preferences affect the choices of individuals deciding privately on lotteries that only affect their own pay-off. Yet, most risky and financially relevant decisions in the field are made in the social settings of households or organizations. We aim to narrow the gap between laboratory and field evidence by creating a more realistic decision making environment in the laboratory that allows us to identify the influence of different social settings under controlled conditions. We elicit higher-order risk preferences of individuals and systematically vary how an individual's decision is made (alone or while communicating with a partner) and who is affected by the decision (only the individual or the partner as well). In doing so, we can isolate the effects of other-regarding concerns and communication on choices. We observe that individuals become more risk-averse when the partner is able to communicate with the decision maker. However, we do not observe an influence of social settings on prudence and temperance. Our results reveal that the majority of choices are risk-averse, prudent, and temperate across social settings.
Book Synopsis Decomposing Social Risk Preferences for Health and Wealth by : Arthur E. Attema
Download or read book Decomposing Social Risk Preferences for Health and Wealth written by Arthur E. Attema and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study reports the results of the first artefactual field experiment designed to measure the prevalence of aversion toward different components of social risks in a large and demographically representative sample. We identify social risk preferences for wealth and health for losses and gains, and decompose these attitudes into four different dimensions: individual risk, collective risk, ex-post inequality, and ex-ante inequality. The results of a non-parametric analysis suggest that aversion to risk and inequality is the modal preference for outcomes in health and wealth in the domain of gains and losses. A parametric decomposition of aversion to risk and inequality shows that respondents are averse to ex-post and ex-ante inequality in health and wealth for gains and losses. Likewise, respondents are averse to collective risk, but risk neutral to individual risk, which highlights the importance of considering different components of social risk preferences when managing social health and wealth risks.
Book Synopsis Investigating the Endogeneity of Risk Attitudes by : Erik Solli
Download or read book Investigating the Endogeneity of Risk Attitudes written by Erik Solli and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Individual decision making is at the core of microeconomics. Rarely, however, are decisions made in environments without some element of uncertainty or even in isolation. While people may differ in their inherent willingness to take on risk, their preferences could change when new information is learned or a new relationship is fostered. I designed an experiment in which participants were asked to make investment decisions involving different levels of risk. The participants completed task between these gambles which allowed me to introduce competitive and collaborative relationships. I was interested in: (1) understanding the factors that are important to explaining risk attitudes, (2) whether people change their risk attitudes, and (3) if attitudes are flexible, whether the type of interaction individuals were exposed to would influence their preference for risk. Using 181 participants from Colby College, I found a number of interesting trends in the data. First, I found that gender, playing a varsity sport, and political party affiliation are all significant predictors of risk preference. Second, individuals often changed their risk attitudes during the experiment, even when aggregate information concerning choices made by others was released. Moreover, I found that subjects in a cooperative environment were more likely to converge towards their partner's risk preferences than subjects in a competitive environment or control environment. I also found evidence showing that in competitive environments, like-gender groups were on average more risk seeking than mixed gender groups. These results are particularly interesting when considering group behavior and team dynamics in government, business, and social settings.
Book Synopsis An Analysis of the Effects of Group Discussion on Individual Risk Preferences by : George C. Gaskell
Download or read book An Analysis of the Effects of Group Discussion on Individual Risk Preferences written by George C. Gaskell and published by . This book was released on 1971 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Individual vs. Aggregate Preferences by : Douglas W. Blackburn
Download or read book Individual vs. Aggregate Preferences written by Douglas W. Blackburn and published by . This book was released on 2010 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that there can be significant difference between risk preferences of individual investors and aggregate preferences toward risk in the economy. To demonstrate this, we investigate aggregate properties of an economy where all investors have convex utility functions corresponding to risk seeking behavior. In the case of risk seeking individual agents with identical initial endowments, assuming a budget constraint, and facing perfect competition the aggregate economy is risk neutral. In the case of risk seeking individuals with different initial endowments, we show that if there exists a continuum of wealth classes the economy in the aggregate will exhibit risk averse behavior. Thus, an economy consisting of risk seeking agents can lead to an aggregate economy that is risk averse. We prove that the converse is also true. For an economy that in the aggregate exhibits risk aversion we can construct an economy of all risk seeking agents that in the aggregate produces the given risk averse indifference curve. That is, an economy demanding a risk premium can be formed from individuals who do not demand such compensation. In the context of the equity premium puzzle our analysis shows that for an aggregate economy to display a high degree of risk aversion and to demand a relatively high risk premium individuals do not need to have implausibly high risk aversion.
Book Synopsis Social Influence on Risky Decision Making by : Kesha Patel
Download or read book Social Influence on Risky Decision Making written by Kesha Patel and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Are people’s risk preferences influenced by the preferences of others they interact with or observe? Traditionally, decision preferences were conceptualized as a stable, dispositional trait. However, recent research has demonstrated that there is a degree of malleability in preferences, with social influence having a particularly potent impact. To better understand the extent of social influence on risky decision-making, a mixed-study design was carried out that involved participants making a series of hypothetical monetary choices between smaller-certain and larger-risky rewards. Participants completed three blocks of the risky-choice task: (1) the pre- exposure block where choices were made without any social information, (2) the exposure block where participants observed the choice of a social other after each trial, and (3) the post-exposure block where participants once again made choices without any social information. Moreover, the preferences of the social other during the exposure block were experimentally manipulated to be the choices of either a risk-averse decision-maker or a risk-tolerant decision-maker. Two individual difference measures (social comparison orientation, decisional conflict) were also completed prior to the social exposure to investigate if some people are more susceptible to social influence than others. The results indicated that exposure to social information did impact participants’ risk preferences. Specifically, whereas the two experimental conditions did not differ during the pre-exposure block, participants in the risk-tolerant social condition exhibited a significantly higher preference for risky rewards during the post-exposure block compared to the risk-averse social condition. Post-hoc analyses indicated that this difference between the two experimental conditions was driven by participants in the risk-tolerant condition significantly increasing their risky choices following the social exposure. For participants in the risk-averse social condition, although risky choices were reduced following the exposure block, this change did not reach statistical significance. The individual difference analyses found that those who scored higher for decisional conflict were more likely to adjust their risk preferences following the social exposure. In contrast, there was no significant relationship between general social comparison tendencies and changes in risk preference. These findings support the idea that decision-making preferences are informed by the observed preferences of others and have implications for interventions that target risky behaviors in group settings.
Book Synopsis Cross-National Differences in Risk Preference and Lay Predictions by : Christopher K. Hsee
Download or read book Cross-National Differences in Risk Preference and Lay Predictions written by Christopher K. Hsee and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This research explores whether there are systematic cross-national differences in choice-inferred risk preferences between Americans and Chinese. Study 1 found(a) that the Chinese were signi®cantly more risk seeking than the Americans, yet(b) that both nationals predicted exactly the opposite Ð that the Americans wouldbe more risk seeking. Study 2 compared Americans' and Chinese risk preferences in investment, medical and academic decisions, and found that Chinese were more risk seeking than Americans only in the investment domain and not in the other domains. These results are explained in terms of a cushion hypothesis, which suggests people in a collectivist society, such as China, are more likely to receive fnancial help if they are in need (i.e. they could be cushioned if they fell), and consequently, they are less risk averse than those in an individualistic society such as the USA.
Book Synopsis Stated and Revealed Heterogeneous Risk Preferences in Educational Choice by : Frank M. Fossen
Download or read book Stated and Revealed Heterogeneous Risk Preferences in Educational Choice written by Frank M. Fossen and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
