Lotteries in Dictator Games: An Experimental Study

Economic agents often consider the consequences of their actions not only for themselves, but for others as well. In these scenarios, either the magnitude of the cost to the agent, or of the gain to beneficiaries, are often uncertain. Until recently, experimental economic studies of altruistic preferences have neglected this consideration, treating both the costs and benefits of other-regarding actions as deterministic. This paper joins a recent body of literature in explicitly incorporating uncertainty into other-regarding decisions. Using Dictator Games and a 2 × 2 experimental design, we analyze giving in situations where both Dictators’ and Receivers’ payoffs can take the form of either lotteries or cash. We find Dictators much more willing to sacrifice their own cash, than to decrease their own chances of wining a lottery, to benefit Receivers. Receivers’ asset type, on the other hand, has little effect on Dictators’ giving. Income effects are also significantly stronger when Dictators’ assets are lotteries. These results can be explained, albeit only partially, by Dictators who are risk-averse over their own wealth, but not over Receivers’ wealth.