IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/68519.html
   My bibliography  Save this paper

Eliciting Preferences Over Risk: An Experiment

Author

Listed:
  • Morone, Andrea
  • Temerario, Tiziana

Abstract

Previous research has begun to investigate how small groups make decisions when facing risky choices. However, no consensus has been reached. One stream of research found that groups are more risk averse, while another one reported the contrary and some studies did not even find any significant difference. This paper is meant to provide a clear comparison between two different experimental designs from Harrison et al. (2012) and Zhang and Casari, (2012). The former tests the risk preferences of groups of three members where group’s decision is taken with the majority rule; the latter, also tests risk preferences of three-members group, but using a different lottery set and aggregation rule, i.e. unanimity. These two experiments lead to different results: Harrison et al. (2012) did not find any substantial difference between individuals’ and groups’ preferences over risk, while Zhang and Casari (2012) found that groups tend to be more prone to the risk neutrality than individuals. Additionally, we present a replication study of Harrison et al. (2012) and Zhang and Casari (2012) in order to check to what extent the lottery set and the aggregation rule (majority or unanimity) adopted to elicit preferences may affect the final group choice. It results that individual and group choices are not significantly different, regardless of the lottery set and the aggregation rule used in the experimental design.

Suggested Citation

  • Morone, Andrea & Temerario, Tiziana, 2015. "Eliciting Preferences Over Risk: An Experiment," MPRA Paper 68519, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:68519
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/68519/1/MPRA_paper_68519.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ronald J. Baker II & Susan K. Laury & Arlington W. Williams, 2008. "Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments," Southern Economic Journal, John Wiley & Sons, vol. 75(2), pages 367-382, October.
    2. John Hey & Andrea Morone & Ulrich Schmidt, 2009. "Noise and bias in eliciting preferences," Journal of Risk and Uncertainty, Springer, vol. 39(3), pages 213-235, December.
    3. Morone, Andrea, 2010. "On price data elicitation: A laboratory investigation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(5), pages 540-545, October.
    4. Andrea Morone & Piergiuseppe Morone, 2010. "Boundary and interior equilibria: what drives convergence in a ‘beauty contest'?," Economics Bulletin, AccessEcon, vol. 30(3), pages 2097-2106.
    5. 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.
    6. Andrea Morone & Ulrich Schmidt, 2008. "An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data," Economics Bulletin, AccessEcon, vol. 4(20), pages 1-12.
    7. Andrea Morone & Serena Sandri & Tobias Uske, 2006. "On the absorbability of the Guessing Game Theory - A Theoretical and Experimental Analysis," Papers on Strategic Interaction 2006-33, Max Planck Institute of Economics, Strategic Interaction Group.
    8. Jingjing Zhang & Marco Casari, 2012. "How Groups Reach Agreement In Risky Choices: An Experiment," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 502-515, April.
    9. John D. Hey & Chris Orme, 2018. "Investigating Generalizations Of Expected Utility Theory Using Experimental Data," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 3, pages 63-98, World Scientific Publishing Co. Pte. Ltd..
    10. Morone, A. & Morone, P. & Germani, A.R., 2014. "Individual and group behaviour in the traveler's dilemma: An experimental study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 49(C), pages 1-7.
    11. Andrea Morone & Piergiuseppe Morone, 2016. "The Focal Point In The Traveller'S Dilemma: An Experimental Study," Bulletin of Economic Research, Wiley Blackwell, vol. 68(S1), pages 123-132, December.
    12. Andrea Morone, 2008. "Comparison of Mean-Variance Theory and Expected-Utility Theory through a Laboratory Experiment," Economics Bulletin, AccessEcon, vol. 3(40), pages 1-7.
    13. Tamar Kugler & Edgar E. Kausel & Martin G. Kocher, 2012. "Are Groups more Rational than Individuals? A Review of Interactive Decision Making in Groups," CESifo Working Paper Series 3701, CESifo.
    14. Martin G. Kocher & Matthias Sutter, 2005. "The Decision Maker Matters: Individual Versus Group Behaviour in Experimental Beauty-Contest Games," Economic Journal, Royal Economic Society, vol. 115(500), pages 200-223, January.
    15. 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.
    16. 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.
    17. David J. Cooper & John H. Kagel, 2005. "Are Two Heads Better Than One? Team versus Individual Play in Signaling Games," American Economic Review, American Economic Association, vol. 95(3), pages 477-509, June.
    18. James Cox & Stephen Hayne, 2006. "Barking up the right tree: Are small groups rational agents?," Experimental Economics, Springer;Economic Science Association, vol. 9(3), pages 209-222, September.
    19. Sarah Jacobson & Ragan Petrie, 2007. "Inconsistent Choices in Lottery Experiments: Evidence from Rwanda," Experimental Economics Center Working Paper Series 2007-03, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    20. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-1326, December.
    21. 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.
    22. Andrea Morone & Piergiuseppe Morone, 2007. "Guessing Games and People Behaviours: What Can we Learn?," SERIES 0015, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Feb 2007.
    23. Masclet, David & Colombier, Nathalie & Denant-Boemont, Laurent & Lohéac, Youenn, 2009. "Group and individual risk preferences: A lottery-choice experiment with self-employed and salaried workers," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 470-484, June.
    24. Gary Charness & Luca Rigotti & Aldo Rustichini, 2007. "Individual Behavior and Group Membership," American Economic Review, American Economic Association, vol. 97(4), pages 1340-1352, September.
    25. 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.
    26. John Bone & John Hey & John Suckling, 2004. "A Simple Risk-Sharing Experiment," Journal of Risk and Uncertainty, Springer, vol. 28(1), pages 23-38, January.
    27. Rockenbach, Bettina & Sadrieh, Abdolkarim & Mathauschek, Barbara, 2007. "Teams take the better risks," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 412-422, July.
    28. A. Morone & P. Morone, 2014. "Estimating individual and group preference functionals using experimental data," Theory and Decision, Springer, vol. 77(3), pages 403-422, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zonna, Davide, 2016. "Sprechi di cibo e tentativi di riduzione. Un caso sperimentale [Avoiding food waste. A field experiment]," MPRA Paper 76097, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Temerario, Tiziana, 2014. "Individual and Group Behaviour Toward Risk: A Short Survey," MPRA Paper 58079, University Library of Munich, Germany.
    2. A. Morone & P. Morone, 2014. "Estimating individual and group preference functionals using experimental data," Theory and Decision, Springer, vol. 77(3), pages 403-422, October.
    3. Tamar Kugler & Edgar E. Kausel & Martin G. Kocher, 2012. "Are Groups more Rational than Individuals? A Review of Interactive Decision Making in Groups," CESifo Working Paper Series 3701, CESifo.
    4. Andrea Morone & Piergiuseppe Morone, 2012. "Are small groups Expected Utility?," Working Papers 2012/08, Economics Department, Universitat Jaume I, Castellón (Spain).
    5. Masclet, David & Colombier, Nathalie & Denant-Boemont, Laurent & Lohéac, Youenn, 2009. "Group and individual risk preferences: A lottery-choice experiment with self-employed and salaried workers," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 470-484, June.
    6. He, Haoran & Villeval, Marie Claire, 2017. "Are group members less inequality averse than individual decision makers?," Journal of Economic Behavior & Organization, Elsevier, vol. 138(C), pages 111-124.
    7. Ambrus, Attila & Greiner, Ben & Pathak, Parag A., 2015. "How individual preferences are aggregated in groups: An experimental study," Journal of Public Economics, Elsevier, vol. 129(C), pages 1-13.
    8. Morone, A. & Morone, P. & Germani, A.R., 2014. "Individual and group behaviour in the traveler's dilemma: An experimental study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 49(C), pages 1-7.
    9. Haoran He & Marie Claire Villeval, 2014. "Are teams less inequality averse than individuals?," Post-Print halshs-01077253, HAL.
    10. Fochmann, Martin & Fochmann, Nadja & Kocher, Martin G. & Müller, Nadja, 2021. "Dishonesty and risk-taking: Compliance decisions of individuals and groups," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 250-286.
    11. Yoshio Kamijo & Teruyuki Tamura, 2016. "Altruistic and risk preference of individuals and groups," Working Papers SDES-2016-12, Kochi University of Technology, School of Economics and Management, revised Oct 2016.
    12. Attila Ambrus & Ben Greiner & Parag Pathak, 2013. "How Individual Preferences Get Aggregated in Groups - an Experimental Study," Working Papers 13-21, Duke University, Department of Economics.
    13. 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.
    14. Karmeliuk, Maria & Kocher, Martin, 2021. "Teams and Individuals in Standard Auction Formats: Decisions and Emotions," Rationality and Competition Discussion Paper Series 279, CRC TRR 190 Rationality and Competition.
    15. Jingjing Zhang & Marco Casari, 2012. "How Groups Reach Agreement In Risky Choices: An Experiment," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 502-515, April.
    16. Roman Sheremeta & Jingjing Zhang, 2010. "Can groups solve the problem of over-bidding in contests?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 35(2), pages 175-197, July.
    17. Haoran He & Marie Claire Villeval, 2014. "Are team members less inequality averse than individual decision makers?," Working Papers halshs-00996545, HAL.
    18. Faralla, Valeria & Borà, Guido & Innocenti, Alessandro & Novarese, Marco, 2020. "Promises in group decision making," Research in Economics, Elsevier, vol. 74(1), pages 1-11.
    19. Stephen Cheung & Stefan Palan, 2012. "Two heads are less bubbly than one: team decision-making in an experimental asset market," Experimental Economics, Springer;Economic Science Association, vol. 15(3), pages 373-397, September.
    20. Morone, Andrea & Temerario, Tiziana & Nemore, Francesco, 2017. "Individual and group preferences over risk: does group size matter?," MPRA Paper 82453, University Library of Munich, Germany.

    More about this item

    Keywords

    risk choice; decision-making under risk and uncertainty; experimental economics; group behavior;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:68519. 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: . General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.