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

Author

Listed:
  • 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.

Suggested Citation

  • Ronald J. Baker II & Susan K. Laury & Arlington W. Williams, 2007. "Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments," CAEPR Working Papers 2007-018, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington, revised May 2008.
    • Handle: RePEc:inu:caeprp:2007018
    as

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    File URL: https://caepr.indiana.edu/RePEc/inu/caeprp/caepr2007-018.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Robert S. Shupp & Arlington W. Williams, 2008. "Risk preference differentials of small groups and individuals," Economic Journal, Royal Economic Society, vol. 118(525), pages 258-283, January.
    4. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutström, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, vol. 95(3), pages 897-901, June.
    5. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    lab experiments; risk preferences; group decisions;
    All these keywords.

    JEL classification:

    • 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

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