Social preferences under risk: Minimizing collective risk vs. reducing ex-post inequality

Alexia Gaudeul

No 283, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: We refine the understanding of individual preferences across social lotteries, whereby the payoffs of a pair of subjects are exposed to random shocks. We find that aggregate behavior is ex-post and ex-ante inequality averse, but also that there is a wide variety of individual preferences and that the majority of subjects are indifferent to social concerns under risk. Furthermore, we determine whether subjects are averse to collective risk - the variability in the sum of payoffs of the pair. We do so by varying the presentation of payoffs. They are shown side by side in one treatment and added-up in the other. The first presentation draws attention to inequality in payoffs, the second to collective risk. We find that subjects dislike lotteries that lead to ex-post unequal distributions of payoffs in both cases and that emphasizing collective risk changes choice only marginally and not significantly, though in the direction of collective risk reduction. We conclude that ex-post inequality aversion is the primary concern in the evaluation of social lotteries while collective risk is only of secondary interest.

Keywords: Altruism; Collective Risk; Experimental Economics; Fairness; Inequality; Risk; Social Lotteries; Social Preferences (search for similar items in EconPapers)
JEL-codes: C91 D63 D81 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cbe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/141319/1/859865703.pdf (application/pdf)

Related works:
Working Paper: Social Preferences under Risk: Ex-Post Fairness vs. Efficiency (2015)
Working Paper: Social preferences under uncertainty (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:283

Access Statistics for this paper

More papers in University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).