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

Ronald J. Baker, Susan K. Laury and Arlington Williams

Southern Economic Journal, 2008, vol. 75, issue 2, 367-382

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.

Date: 2008
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https://doi.org/10.1002/j.2325-8012.2008.tb00909.x

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Working Paper: Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments (2008)
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