Risk Tolerance, Self-Interest, and Social Preferences

47 Pages Posted: 7 Jan 2011

See all articles by Lucy F. Ackert

Lucy F. Ackert

Kennesaw State University - Michael J. Coles College of Business

Ann B. Gillette

Kennesaw State University - Michael J. Coles College of Business; Federal Reserve Banks - Federal Reserve Bank of Atlanta

Jorge Martinez-Vazquez

Georgia State University - Andrew Young School of Policy Studies

Mark Rider

Georgia State University - Department of Economics

Date Written: January 1, 2009

Abstract

We use an experimental method to investigate whether systematic relationships exist across distinct aspects of individual preferences: risk aversion in monetary outcomes, altruism in a two-person context, and social preferences in a larger group context. Individual preferences across these three contexts are measured, and there is no possibility for risk sharing, wealth effects, or updating expectations of the population choices. We find that social preferences are related to demographic variables, including years of education, gender, and age. Perhaps most importantly, self allocation in a two-person dictator game is related to social preferences in a group context. Participants who are more generous in a dictator game are more likely to vote against their self-interest in a group decision-making task which we interpret to be expressions of social preferences.

Keywords: equity, social preferences, optimal taxation

JEL Classification: C91, C92, D63, H21

Suggested Citation

Ackert, Lucy F. and Gillette, Ann Brewer and Martinez-Vazquez, Jorge and Rider, Mark, Risk Tolerance, Self-Interest, and Social Preferences (January 1, 2009). Andrew Young School of Policy Studies Research Paper Series No. 11-03, Available at SSRN: https://ssrn.com/abstract=1736177 or http://dx.doi.org/10.2139/ssrn.1736177

Lucy F. Ackert

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Department of Economics and Finance
Kennesaw, GA 30144
United States
770-423-6111 (Phone)
770-499-3209 (Fax)

Ann Brewer Gillette

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Jorge Martinez-Vazquez

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

University Plaza
PO Box 3992
Atlanta, GA 30302-3992
United States
404-651-3990 (Phone)
404-651-3996 (Fax)

Mark Rider (Contact Author)

Georgia State University - Department of Economics ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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