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Risk Preference Differentials of Small Groups and Individuals

Robert Shupp and Arlington Williams ()

No 200301, Working Papers from Ball State University, Department of Economics

Abstract: The risk preferences of three-person groups and individuals are compared using a non-sequential repeated-measures lottery experiment with $20 per-player win percentages varying from 10% to 90%. Analysis based on independent samples of certainty equivalent ratios (certainty equivalent/expected value) elicited using a maximum willingness-to-pay mechanism for fifty-two individuals and sixteen groups reveals that: 1) certainty equivalent ratios (CERs) vary significantly across lottery win percentages, 2) CER dispersion tends to decline as the lottery win percentage increases and is significantly smaller for groups than individuals in seven of the nine lotteries, 3) for the highest-risk lotteries, the average CERs submitted by groups are significantly smaller (more risk averse) than the average CERs submitted by individuals, 4) for the lowest-risk lotteries, the average CERs submitted by groups are approximately risk-neutral (CER=1) and somewhat larger than the average CERs submitted by individuals.

Keywords: lab experiments; risk preferences; group decisions; certainty equivalents (search for similar items in EconPapers)
JEL-codes: C91 C92 D80 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2003-11, Revised 2006-04
New Economics Papers: this item is included in nep-exp and nep-upt
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Downloads: (external link)
http://econfac.bsu.edu/research/workingpapers/bsuecwp200301shupp.pdf First version, 2003 (application/pdf)

Related works:
Journal Article: Risk preference differentials of small groups and individuals (2008)
Journal Article: Risk preference differentials of small groups and individuals (2008) Downloads
Working Paper: Risk Preference Differentials of Small Groups and Individuals (2006) Downloads
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