IDEAS home Printed from https://ideas.repec.org/p/inu/caeprp/2006006.html
   My bibliography  Save this paper

Risk Preference Differentials of Small Groups and Individuals

Author

Listed:
  • Robert S. Shupp

    (Ball State University)

  • Arlington W. Williams

    (Indiana University Bloomington)

Abstract

This research compares lottery valuation decisions made by individuals with similar decisions made by small groups. There is an extensive social psychology literature addressing group versus individual decision making, but few studies explore this issue in economic contexts with cash rewards. Willingness-topay data elicited from independent samples of individuals and three-person groups in a repeated-measures experimental design reveal that: 1) the variance of risk preferences is generally smaller for groups than individuals, and 2) the average group is more risk averse than the average individual in high-risk situations, but groups tend to be less risk averse in low-risk situations.

Suggested Citation

  • Robert S. Shupp & Arlington W. Williams, 2006. "Risk Preference Differentials of Small Groups and Individuals," CAEPR Working Papers 2006-006, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    • Handle: RePEc:inu:caeprp:2006006
    as

    Download full text from publisher

    File URL: https://caepr.indiana.edu/RePEc/inu/caeprp/caepr2006-006.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    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. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    3. 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.
    4. 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.
    5. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    6. Ortona, Guido, 1994. "Examining Risk Preferences under High Monetary Incentives: Comment," American Economic Review, American Economic Association, vol. 84(4), pages 1104-1104, September.
    7. Kachelmeier, Steven J & Shehata, Mohamed, 1992. "Examining Risk Preferences under High Monetary Incentives: Experimental Evidence from the People's Republic of China," American Economic Review, American Economic Association, vol. 82(5), pages 1120-1141, December.
    8. 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.
    9. Smith, Vernon L & Walker, James M, 1993. "Monetary Rewards and Decision Cost in Experimental Economics," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 245-261, April.
    10. Bone, John & Hey, John & Suckling, John, 1999. "Are Groups More (or Less) Consistent Than Individuals?," Journal of Risk and Uncertainty, Springer, vol. 18(1), pages 63-81, April.
    11. Kachelmeier, Steven J & Shehata, Mohamed, 1994. "Examining Risk Preferences under High Monetary Incentives: Reply," American Economic Review, American Economic Association, vol. 84(4), pages 1105-1106, September.
    12. 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.
    13. 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.
    14. Ian Bateman & Alistair Munro, 2005. "An Experiment on Risky Choice Amongst Households," Economic Journal, Royal Economic Society, vol. 115(502), pages 176-189, March.
    15. 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.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. 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.
    3. 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.
    4. Cary Deck & Jungmin Lee & Javier Reyes & Chris Rosen, 2012. "Risk‐Taking Behavior: An Experimental Analysis of Individuals and Dyads," Southern Economic Journal, John Wiley & Sons, vol. 79(2), pages 277-299, October.
    5. 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.
    6. 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.
    7. 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.
    8. Daniela Di Cagno & Emanuela Sciubba & Marco Spallone, 2012. "Choosing a gambling partner: testing a model of mutual insurance in the lab," Theory and Decision, Springer, vol. 72(4), pages 537-571, April.
    9. 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.
    10. Andrea Morone & Piergiuseppe Morone, 2012. "Are small groups Expected Utility?," Working Papers 2012/08, Economics Department, Universitat Jaume I, Castellón (Spain).
    11. Carbone, Enrica & Infante, Gerardo, 2015. "Are groups better planners than individuals? An experimental analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 112-119.
    12. Yoshio Kamijo & Teruyuki Tamura, 2023. "Risk-Averse and Self-Interested Shifts in Groups in Both Median and Random Rules," Games, MDPI, vol. 14(1), pages 1-21, February.
    13. 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.
    14. 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.
    15. Morone, Andrea & Temerario, Tiziana, 2015. "Eliciting Preferences Over Risk: An Experiment," MPRA Paper 68519, University Library of Munich, Germany.
    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. Tibor Besedeš & Cary Deck & Sarah Quintanar & Sudipta Sarangi & Mikhail Shor, 2014. "Effort and Performance: What Distinguishes Interacting and Noninteracting Groups from Individuals?," Southern Economic Journal, John Wiley & Sons, vol. 81(2), pages 294-322, October.
    18. Temerario, Tiziana, 2014. "Individual and Group Behaviour Toward Risk: A Short Survey," MPRA Paper 58079, University Library of Munich, Germany.
    19. He, Haoran & Martinsson, Peter & Sutter, Matthias, 2012. "Group decision making under risk: An experiment with student couples," Economics Letters, Elsevier, vol. 117(3), pages 691-693.
    20. Baethge, Caroline, 2016. "Performance in the beauty contest: How strategic discussion enhances team reasoning," Passauer Diskussionspapiere, Betriebswirtschaftliche Reihe B-17-16, University of Passau, Faculty of Business and Economics.

    More about this item

    Keywords

    lab experiments; risk preferences; group decisions; certainty equivalents;
    All these keywords.

    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

    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:inu:caeprp:2006006. 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.

    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: Center for Applied Economics and Policy Research (email available below). General contact details of provider: https://edirc.repec.org/data/caeprus.html .

    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.