IDEAS home Printed from https://ideas.repec.org/a/kap/expeco/v9y2006i2p171-172.html
   My bibliography  Save this article

Comparing group and individual decision-making in risky environments

Author

Listed:
  • Ronald Baker

Abstract

This dissertation completes salient group and individual experiments in two environments that differ as to whether or not an evaluative criterion exists to judge subject performance. The first environment is lottery-choice. No such criterion exists in a lottery-choice environment. Subjects base their decisions on their preference for risk. A lottery-choice experiment consists of a menu of paired lottery choices structured so that the crossover point to the high-risk lottery can be used to infer the degree of risk aversion. The results show a significant interaction exists between subject composition and lottery winning-percentage. Groups are more likely than individuals to choose the “safe” lottery in the lowest winning-percentages, but less likely to choose the “safe” lottery in the highest winning-percentages. This effect is also present in the sequenced experiment. Further, the sequenced experiment shows that group discussion results in a significant increase in the group’s risk aversion from the average risk preference of its members. Finally, the sequenced experiment shows making a decision in the group phase has an immediate impact on subsequent individual decisions compared to the subject’s initial decisions. The second environment is resource allocation. A resource allocation experiment consists of subjects making repeated decisions of how to divide an endowment into two assets, one of which the payoff is unknown. An evaluative criterion to the resource allocation problem exists, as there is a specific allocation that maximizes payoffs. However, subjects must learn the solution through search. Experimental results show: 1) group performance in the resource allocation experiment is not significantly different than individuals; 2) the predictions from a local search model are more consistent with group decisions than the predictions from a global search model; and 3) group risk preferences elicited through a separate lottery-choice experiment are not indicative of their performance in the resource allocation experiment. Copyright Economic Science Association 2006

Suggested Citation

  • Ronald Baker, 2006. "Comparing group and individual decision-making in risky environments," Experimental Economics, Springer;Economic Science Association, vol. 9(2), pages 171-172, June.
  • Handle: RePEc:kap:expeco:v:9:y:2006:i:2:p:171-172
    DOI: 10.1007/s10683-006-7045-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10683-006-7045-8
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s10683-006-7045-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Experiments; Group Decision-Making;

    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:kap:expeco:v:9:y:2006:i:2:p:171-172. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.