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Group and individual risk preferences : a lottery-choice experiment

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Author Info
David Masclet () (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen, CIRANO - Centre Interuniversitaire de Recherche en ANalyse des Organisations)
Youenn Loheac () (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
Laurent Denant-Boèmont () (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)
Nathalie Colombier () (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)

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Abstract

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.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00118973_v1.

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Date of creation: Sep 2006
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Handle: RePEc:hal:cesptp:halshs-00118973_v1

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Related research
Keywords: Experiment; decision rule; individual decision; group decision.;

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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.:
  1. Martin G. Kocher & Matthias Sutter, 2004. "The Decision Maker Matters: Individual versus Group Behaviour in Experimental Beauty-Contest Games," Papers on Strategic Interaction 2004-09, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
    Other versions:
  2. 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.
    Other versions:
  3. Sutter, Matthias, 2005. "Are four heads better than two? An experimental beauty-contest game with teams of different size," Economics Letters, Elsevier, vol. 88(1), pages 41-46, July. [Downloadable!] (restricted)
    Other versions:
  4. Matthias Sutter & Martin Kocher & Sabine Strauß, . "Individuals and teams in UMTS-license auctions," Working Papers 2007-23, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
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  6. Kocher, Martin & Strau[ss], Sabine & Sutter, Matthias, 2006. "Individual or team decision-making--Causes and consequences of self-selection," Games and Economic Behavior, Elsevier, vol. 56(2), pages 259-270, August. [Downloadable!] (restricted)
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  7. Alan S. Blinder & John Morgan, 2000. "Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking," NBER Working Papers 7909, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. 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 1465-83, September. [Downloadable!] (restricted)
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  12. Bone, John, 1998. "Risk-sharing CARA individuals are collectively EU," Economics Letters, Elsevier, vol. 58(3), pages 311-317, March. [Downloadable!] (restricted)
  13. Prather, Larry J. & Middleton, Karen L., 2002. "Are N+1 heads better than one?: The case of mutual fund managers," Journal of Economic Behavior & Organization, Elsevier, vol. 47(1), pages 103-120, January. [Downloadable!] (restricted)
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  15. Bettina Kuon & Abdolkarim Sadrieh & Barbara Mathauschek, 1999. "Teams Take the Better Risks," Discussion Paper Serie B 452, University of Bonn, Germany.
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  16. 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. [Downloadable!]
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  19. James Cox & Stephen Hayne, 2006. "Barking up the right tree: Are small groups rational agents?," Experimental Economics, Springer, vol. 9(3), pages 209-222, September. [Downloadable!] (restricted)
  20. Jayson L. Lusk & Keith H. Coble, 2005. "Risk Perceptions, Risk Preference, and Acceptance of Risky Food," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 87(2), pages 393-405, 05. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Ronald J. Baker II & Susan K. Laury & Arlington W. Williams, 2007. "Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments," Caepr Working Papers 2007-018, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington. [Downloadable!]
    Other versions:
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