Risk Preference Differentials of Small Groups and Individuals
The 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.
|Date of creation:||Nov 2003|
|Date of revision:||Apr 2006|
|Contact details of provider:|| Postal: Muncie, Indiana 47306|
Phone: (765) 285-5360
Fax: (765) 285-8024
Web page: http://www.bsu.edu/econ
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gary Bornstein & Ilan Yaniv, 1998. "Individual and Group Behavior in the Ultimatum Game: Are Groups More “Rational” Players?," Experimental Economics, Springer;Economic Science Association, vol. 1(1), pages 101-108, June.
- Kachelmeier, Steven J & Shehata, Mohamed, 1992. "Examining Risk Preferences under High Monetary Incentives: Experimental Evidence from the People's Republic of China," American Economic Review, American Economic Association, vol. 82(5), pages 1120-1141, December.
- 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.
- Ortona, Guido, 1994. "Examining Risk Preferences under High Monetary Incentives: Comment," American Economic Review, American Economic Association, vol. 84(4), pages 1104-1104, September.
- Kachelmeier, Steven J & Shehata, Mohamed, 1994. "Examining Risk Preferences under High Monetary Incentives: Reply," American Economic Review, American Economic Association, vol. 84(4), pages 1105-1106, September.
- Cason, Timothy N & Mui, Vai-Lam, 1997. "A Laboratory Study of Group Polarisation in the Team Dictator Game," Economic Journal, Royal Economic Society, vol. 107(444), pages 1465-1483, September.
- Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
- Smith, Vernon L & Walker, James M, 1993. "Monetary Rewards and Decision Cost in Experimental Economics," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 245-261, April.
- Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
When requesting a correction, please mention this item's handle: RePEc:bsu:wpaper:200301. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tung Liu)
If references are entirely missing, you can add them using this form.