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Defaults, Normative Anchors and the Occurrence of Risky and Cautious Shifts

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  • Stephan Jagau

    (University of Amsterdam)

  • Theo (T.J.S.) Offerman

    (University of Amsterdam; Tinbergen Institute, The Netherlands)

Abstract

Choice shifts occur when individuals advocate a risky (safe) decision when acting as part of a group even though they prefer a safe (risky) decision when acting as individuals. Even though research in psychology and economics has produced a mass of evidence on this puzzling phenomenon, there is no agreement about which mechanism produces choice shifts. In an experiment, we investigate the performance of two prominent mechanisms that have been proposed to explain the phenomenon; (i) rank-dependent utility and (ii) a desire to conform to the wishes of the majority. The evidence provides clear support for the conformity explanation.

Suggested Citation

  • Stephan Jagau & Theo (T.J.S.) Offerman, 2017. "Defaults, Normative Anchors and the Occurrence of Risky and Cautious Shifts," Tinbergen Institute Discussion Papers 17-083/I, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20170083
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    2. Dannenberg, Astrid & Diekert, Florian & Händel, Philipp, 2022. "The effects of social information and luck on risk behavior of small-scale fishers at Lake Victoria," Journal of Economic Psychology, Elsevier, vol. 90(C).
    3. Lima de Miranda, Katharina & Detlefsen, Lena & Schmidt, Ulrich, 2019. "Can gender quotas prevent risky choice shifts? The effect of gender composition on group decisions under risk," Kiel Working Papers 2135, Kiel Institute for the World Economy (IfW Kiel).
    4. Lai, Joel Weijia & Cheong, Kang Hao, 2022. "Risk-taking in social Parrondo’s games can lead to Simpson’s paradox," Chaos, Solitons & Fractals, Elsevier, vol. 158(C).

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    More about this item

    Keywords

    risky shift; cautious shift; conformity; diffusion of responsibility; rank-dependent utility;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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