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Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments

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Author Info

  • Ronald J. Baker II

    () (Millersville University of Pennsylvania)

  • Susan K. Laury

    () (Georgia State University)

  • Arlington W. Williams

    () (Indiana University Bloomington)

Abstract

Lottery-choice experiments are conducted to compare risk preferences revealed by three-person groups versus isolated individuals. A lottery-choice experiment consists of a menu of paired lottery choices structured so that the crossover point from a low-risk to a high-risk lottery can be used to infer the degree of risk aversion. A between-subjects experiment of group versus individual lottery-choice decisions reveal that there is not a significant difference in the average crossover point, but lottery choices are affected by a significant interaction between subject composition (individual or group) and lottery winning percentage. Also, a three-phased individual-group-individual sequenced experiment reveals that the count of safe lotteries chosen by groups is, on average, significantly greater than the mean of the individual members. Finally, making a phase-two group decision has a significant impact on subsequent phase-three individual decisions relative to the initial phase-one (individual) decisions.

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File URL: http://www.iub.edu/~caepr/RePEc/PDF/2007/CAEPR2007-018.pdf
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Bibliographic Info

Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2007-018.

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Length: 30 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:inu:caeprp:2007018

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Keywords: lab experiments; risk preferences; group decisions;

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References

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  1. David Masclet & Youenn Loheac & Laurent Denant-Boemont & Nathalie Colombier, 2004. "Group and individual risk preferences : a lottery-choice experiment," Cahiers de la Maison des Sciences Economiques bla06063, Université Panthéon-Sorbonne (Paris 1), revised Sep 2006.
  2. 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.
  3. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  4. repec:hal:journl:halshs-00118973 is not listed on IDEAS
  5. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutstr�m, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, vol. 95(3), pages 897-901, June.
  6. Charles A. Holt & Susan K. Laury, 2005. "Risk Aversion and Incentive Effects: New Data without Order Effects," American Economic Review, American Economic Association, vol. 95(3), pages 902-912, June.
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Cited by:
  1. David Masclet & Youenn Loheac & Laurent Denant-Boemont & Nathalie Colombier, 2004. "Group and individual risk preferences : a lottery-choice experiment," Cahiers de la Maison des Sciences Economiques bla06063, Université Panthéon-Sorbonne (Paris 1), revised Sep 2006.
  2. Jingjing Zhang & Marco Casari, 2009. "How groups reach agreement in risky choices: an experiment," Department of Economics Working Papers 2009-08, McMaster University.
  3. He, Haoran & Martinsson, Peter & Sutter, Matthias, 2011. "Group Decision Making Under Risk: An experiment with student couples," Working Papers in Economics 519, University of Gothenburg, Department of Economics.
  4. Ertac, Seda & Gurdal, Mehmet Y., 2012. "Deciding to decide: Gender, leadership and risk-taking in groups," Journal of Economic Behavior & Organization, Elsevier, vol. 83(1), pages 24-30.
  5. Lucy F. Ackert & Ann B. Gillette & Jorge Martinez-Vazquez & Mark Rider, 2009. "Risk Tolerance, Self-Interest, and Social Preferences," Experimental Economics Center Working Paper Series 2009-04, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Feb 2011.
  6. Seda Ertac & Mehmet Y. Gurdal, 2012. "Personality, Group Decision-Making and Leadership," Koç University-TUSIAD Economic Research Forum Working Papers 1227, Koc University-TUSIAD Economic Research Forum.
  7. Tibor Besedes & Cary Deck & Sarah Quintanar & Sudipta Sarangi & Mikhael Shor, 2012. "Free-Riding and Performance in Collaborative and Non-Collaborative Groups," Working papers 2012-21, University of Connecticut, Department of Economics.
  8. Daniela Di Cagno & Emanuela Sciubba & Marco Spallone, 2012. "Choosing a gambling partner: testing a model of mutual insurance in the lab," Theory and Decision, Springer, vol. 72(4), pages 537-571, April.
  9. Klemens Keldenich & Marcus Klemm, 2011. "Double or Nothing!? Small Groups Making Decisions Under Risk in “Quiz Taxi”," Ruhr Economic Papers 0278, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  10. Tamar Kugler & Edgar E. Kausel & Martin G. Kocher, 2012. "Are Groups more Rational than Individuals? A Review of Interactive Decision Making in Groups," CESifo Working Paper Series 3701, CESifo Group Munich.
  11. Michailova, Julija, 2010. "Overconfidence, risk aversion and (economic) behavior of individual traders in experimental asset markets," MPRA Paper 26390, University Library of Munich, Germany.
  12. Masclet, David & Colombier, Nathalie & Denant-Boemont, Laurent & Lohéac, Youenn, 2009. "Group and individual risk preferences: A lottery-choice experiment with self-employed and salaried workers," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 470-484, June.

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