Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments
AbstractLottery-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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Bibliographic InfoPaper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2007-018.
Length: 30 pages
Date of creation: Sep 2007
Date of revision:
lab experiments; risk preferences; group decisions;
Other versions of this item:
- Ronald J. Baker II & Susan K. Laury & Arlington W. Williams, 2008. "Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments," Southern Economic Journal, Southern Economic Association, vol. 75(2), pages 367-382, October.
- Ronald J. Baker II & Susan K. Laury & Arlington W. Williams, 2008. "Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments," Caepr Working Papers 2007-018_Updated, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
- 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-2007-09-24 (All new papers)
- NEP-CBE-2007-09-24 (Cognitive & Behavioural Economics)
- NEP-CDM-2007-09-24 (Collective Decision-Making)
- NEP-DCM-2007-09-24 (Discrete Choice Models)
- NEP-EXP-2007-09-24 (Experimental Economics)
- NEP-UPT-2007-09-24 (Utility Models & Prospect Theory)
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