Risk Preference Differentials of Small Groups and Individuals
AbstractThe risk preferences of three-person groups and individuals are compared using a non-sequential repeated-measures lottery experiment with $20 per-player win percentages varying from 10% to 90%. Analysis based on independent samples of certainty equivalent ratios (certainty equivalent/expected value) elicited using a maximum willingness-to-pay mechanism for fifty-two individuals and sixteen groups reveals that: 1) certainty equivalent ratios (CERs) vary significantly across lottery win percentages, 2) CER dispersion tends to decline as the lottery win percentage increases and is significantly smaller for groups than individuals in seven of the nine lotteries, 3) for the highest-risk lotteries, the average CERs submitted by groups are significantly smaller (more risk averse) than the average CERs submitted by individuals, 4) for the lowest-risk lotteries, the average CERs submitted by groups are approximately risk-neutral (CER=1) and somewhat larger than the average CERs submitted by individuals.
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Bibliographic InfoPaper provided by Ball State University, Department of Economics in its series Working Papers with number 200301.
Length: 41 pages
Date of creation: Nov 2003
Date of revision: Apr 2006
lab experiments; risk preferences; group decisions; certainty equivalents;
Other versions of this item:
- RobertS. Shupp & ArlingtonW. Williams, 2008. "Risk preference differentials of small groups and individuals," Economic Journal, Royal Economic Society, vol. 118(525), pages 258-283, 01.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-27 (All new papers)
- NEP-EXP-2006-05-27 (Experimental Economics)
- NEP-UPT-2006-05-27 (Utility Models & Prospect Theory)
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