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Comparing Small‐Group and Individual Behavior in Lottery‐Choice Experiments

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Listed:
  • Ronald J. Baker
  • Susan K. Laury
  • Arlington W. Williams

Abstract

Lottery‐choice experiments are conducted to compare risk preferences revealed by three‐person groups versus isolated individuals. A lottery‐choice experiment consists of a menu of paired lottery choices structured so that the crossover point from a low‐risk to a high‐risk lottery can be used to infer the degree of risk aversion. The data from a between‐subjects experiment indicate that the difference in the average crossover point for groups versus individuals is not significant, but groups tend to make decisions that are more consistent with risk‐neutral preferences in the lowest and highest risk lotteries. The data from a three‐phase individual‐group‐individual sequenced experiment indicate that groups choose significantly more low‐risk lotteries than the mean choice of the individual group members. Also, making a phase 2 group decision influences the subsequent phase 3 individual decisions toward the group decision relative to the initial phase 1 (individual) decisions.

Suggested Citation

  • Ronald J. Baker & 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, August.
    • Handle: RePEc:wly:soecon:v:75:y:2008:i:2:p:367-382
    DOI: 10.1002/j.2325-8012.2008.tb00909.x
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    References listed on IDEAS

    as
    1. 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.
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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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