Are individuals more risk and ambiguity averse in a group environment or alone? Results from an experimental study

Article English OPEN
Brunette, M. ; Cabantous, L. ; Couture, S. (2015)

Most decision-making research in economics focuses on individual decisions. Yet, we know, from psychological research in particular, that individual preferences can be sensitive to social pressures. In this paper, we study the impact of a group environment on individual preferences for risky (i.e., known probabilities) and ambiguous (i.e., unknown probabilities) prospects. In our experiment, each participant was invited to make a series of lottery-choice decisions in two different conditions. In the Alone condition, individuals made private choices, whereas in the Group condition, individuals belonged to a three-person group and group members' choices were aggregated according to either a majority or unanimity rule. This design allows us to study the impact of a group environment on individuals' attitude towards both risky and ambiguous prospects, while controlling for the decision rule used in the group. Our experimental results show that when individuals are in the Group condition, they tend to be less risk averse and more ambiguity averse than when they are not part of a group (Alone condition). Our experiment also suggests that the decision rule matters as it shows that these two trends tend to be stronger when the group implements a unanimity rule. Specifically, we found that individuals who belong to a group implementing a unanimity rule are significantly less risk averse than individuals who belong to a group that relies on the majority rule. We obtained a similar-but non-significant-result under ambiguity.
  • References (10)

    Abdellaoui, M., Baillon, A., Placido, L., & Wakker, P.P. (2010). The rich domain of uncertainty: Source functions and their experimental implementation. American Economic Review, 101(2), 695-723.

    Akay, A., Martinsson, P., Medhin, H., & Trautmann, S.T (2012). Attitudes toward uncertainty among the poor: an experiment in rural Ethiopia. Theory and Decision, 73(3), 453-464.

    Ambrus, A., Greiner, B., & Pathak, P. (2009). Group versus individual decision-making: Is there a shift? Institute for Advanced Study, School of Social Science Economics Working Paper 0091.

    Andersen, S., Harrison, G.W., Lau, M.I., & Rutström, E.E. (2006). Elicitation using multiple price list formats. Experimental Economics, 9(4), 383-405.

    Aronson, E., Wilson, T.D., & Akert, R.M. (2005). Social Psychology (5th ed.). Upper Saddle River: Pearson.

    Baker, R.J., Laury, S.K., & Williams, A.W. (2008). Comparing small-group and individual behavior in lottery-choice experiments. Southern Economic Journal, 75, 367-382.

    Blinder, A.S., & Morgan, J. (2005). Are two heads better than one? Monetary Policy by Committee. Journal of Money Credit and Banking, 37, 798-811.

    Brown, R. (1986). Social Psychology (2nd édition). New York: Free Press.

    Camerer, C.F. (1995). Individual Decision Making, in John H Kagel and Alvin E Roth eds., The Handbook of Experimental Economics. Princeton U.P.

    Table A.2. The ten-paired lottery-choice decision under ambiguity (adapted from Chakravarty and Roy, 2009)

  • Metrics
    No metrics available
Share - Bookmark