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

30 Pages Posted: 20 Sep 2007  

Ronald J. Baker II

Millersville University - Economics

Susan Laury

Georgia State University - Andrew Young School of Policy Studies

Arlington W. Williams

Indiana University Bloomington - Department of Economics

Date Written: September 20, 2007

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. A between-subjects experiment of group versus individual lottery-choice decisions reveal that there is not a significant difference in the average crossover point, but lottery choices are affected by a significant interaction between subject composition (individual or group) and lottery winning percentage. Also, a three-phased individual-group-individual sequenced experiment reveals that the count of safe lotteries chosen by groups is, on average, significantly greater than the mean of the individual members. Finally, making a phase-two group decision has a significant impact on subsequent phase-three individual decisions relative to the initial phase-one (individual) decisions.

Keywords: lab experiments, risk preferences, group decisions

JEL Classification: C91, C92, D80

Suggested Citation

Baker, Ronald J. and Laury, Susan and Williams, Arlington W., Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments (September 20, 2007). CAEPR Working Paper No. 2007-018. Available at SSRN: https://ssrn.com/abstract=1015833 or http://dx.doi.org/10.2139/ssrn.1015833

Ronald J. Baker II (Contact Author)

Millersville University - Economics ( email )

Millersville, PA 17554
United States

Susan Laury

Georgia State University - Andrew Young School of Policy Studies ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

Arlington W. Williams

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall 105
Bloomington, IN 47405-6620
United States
812-855-4564 (Phone)
812-855-3736 (Fax)

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