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Dictating the risk – experimental evidence on giving in risky environments

  • J. Michelle Brock

    ()

    (EBRD)

  • Andreas Lange

    ()

    (University of Hamburg)

  • Erkut Y. Ozbay

    ()

    (University of Maryland)

We study if and how social preferences extend to risky environments. By providing experimental evidence on different versions of “dictator games” with risky outcomes, we establish that social preferences of players who give in standard dictator games cannot be described solely by concerns over ex post distributions. Instead, dictators take the distribution of ex ante chances to win into account: the more money decision-makers transfer in the standard dictator game, the more likely they are to equalise to payoff chances under risk. Risk to the recipient does, however, generally decrease the transferred amount. Ultimately, preferences that are exclusively based on ex post or on ex ante comparisons cannot generate the observed behavioural patterns and a utility function with a combination of these concerns may best describe behaviour.

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Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 139.

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Length: 37 pages
Date of creation: Dec 2011
Date of revision:
Publication status: Published in Working papers 139, European Bank for Reconstruction and Development
Handle: RePEc:ebd:wpaper:139
Contact details of provider: Postal: One Exchange Square, London EC2A 2JN
Web page: http://www.ebrd.com/pages/research/publications/workingpapers.shtml

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  1. Alexander W. Cappelen & James Konow & Erik ?. S?rensen & Bertil Tungodden, 2013. "Just Luck: An Experimental Study of Risk-Taking and Fairness," American Economic Review, American Economic Association, vol. 103(4), pages 1398-1413, June.
  2. Trautmann, Stefan T., 2009. "A tractable model of process fairness under risk," Journal of Economic Psychology, Elsevier, vol. 30(5), pages 803-813, October.
  3. John A. List, 2007. "On the Interpretation of Giving in Dictator Games," Journal of Political Economy, University of Chicago Press, vol. 115, pages 482-493.
  4. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Chambers, Christopher P., 2012. "Inequality aversion and risk aversion," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1642-1651.
  6. Christoph Engel, 2010. "Dictator Games: A Meta Study," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_07, Max Planck Institute for Research on Collective Goods, revised Jan 2011.
  7. Charlotte Klempt & Kerstin Pull, 2010. "Committing to Incentives: Should the Decision to Sanction be Revealed or Hidden?," Jena Economic Research Papers 2010-013, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  8. Bohnet, Iris & Zeckhauser, Richard, 2003. "Trust, Risk and Betrayal," Working Paper Series rwp03-041, Harvard University, John F. Kennedy School of Government.
  9. Sandroni Alvaro & Ludwig Sandra & Kircher Philipp, 2013. "On the Difference between Social and Private Goods," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 27, June.
  10. Grant, Simon, 1995. "Subjective Probability without Monotonicity: Or How Machina's Mom May Also Be Probabilistically Sophisticated," Econometrica, Econometric Society, vol. 63(1), pages 159-89, January.
  11. Forsythe Robert & Horowitz Joel L. & Savin N. E. & Sefton Martin, 1994. "Fairness in Simple Bargaining Experiments," Games and Economic Behavior, Elsevier, vol. 6(3), pages 347-369, May.
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