Group and individual risk preferences: a lottery-choice experiment

This paper focuses on decision making under risk, comparing group and individual risk preferences in a lottery-choice experiment inspired by Holt and Laury (2002). The experiment presents subjects with a menu of unordered lottery choices which allows us to measure risk aversion. In the individual treatment, subjects make lottery choices individually; in the group treatment, each subject was placed in an anonymous group of three, where unanimous lottery choice decisions were made via voting. Finally, in a third treatment, called the choice treatment, subjects could choose whether to be on their own or in a group. Our main findings are that groups are more likely than individuals to choose safe lotteries for decisions with low winning percentages. Moreover, groups converge toward less risky decisions because subjects who were relatively less risk averse were more likely to change their vote in order to conform to the group average decision; more risk-averse individuals were less likely to change their preferences. Finally our results reveal a positive relationship between preference for risk and willingness to decide alone.