In the Mood for Risk? A Random-Assignment Experiment Addressing the Effects of Moods on Risk Preferences

36 Pages Posted: 4 Oct 2012

See all articles by Theresa Treffers

Theresa Treffers

Eindhoven University of Technology (TUE) - Department of Industrial Engineering and Innovation Sciences

Philipp Koellinger

Vrije Universiteit Amsterdam

Arnold Oskar Picot

Ludwig Maximilians University of Munich - Faculty of Business Administration (Munich School of Management)

Date Written: November 21, 2012

Abstract

Recent discussions in decision sciences and behavioral economics stress the potential impact of affect on decision outcomes. In the present study, we conducted random-assignment experiments (N = 253) to investigate whether affect can cause temporary fluctuations in risk preferences. In particular, we employed film clips to vary the valence (positive / negative) and arousal level (low / high) of the affective states of student participants; following this, we elicited and observed risk preferences by asking the participants to make choices among different lotteries. The financial consequences of the lottery choices varied randomly among the fixed, low-, and high-stakes treatment groups. Our results suggest that the impact of affect on risk preferences depends on the magnitude of the financial stakes. Specifically, we find that sadness induces risk aversion but only if the financial stakes are fixed or low. We find no evidence that affect influences risk preferences under high-stakes treatments. The observed sensitivity to variations in the financial incentives in our study reinforces the value of incentive-compatible study designs.

Keywords: affect, emotion, mood, financial stakes, risk preferences, random-assignment experiment

Suggested Citation

Treffers, Theresa and Koellinger, Philipp and Picot, Arnold Oskar, In the Mood for Risk? A Random-Assignment Experiment Addressing the Effects of Moods on Risk Preferences (November 21, 2012). ERIM Report Series Reference No. ERS-2012-014-ORG, Available at SSRN: https://ssrn.com/abstract=2156782

Theresa Treffers (Contact Author)

Eindhoven University of Technology (TUE) - Department of Industrial Engineering and Innovation Sciences ( email )

Den Dolech 2
Eindhoven
Netherlands

Philipp Koellinger

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

HOME PAGE: http://www.philipp-koellinger.com

Arnold Oskar Picot

Ludwig Maximilians University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Ludwigstraße 28
München, 80995
Germany
+49 89 2180-2252 (Phone)
0049-89-2180-3685 (Fax)

HOME PAGE: http://www.iom.bwl.uni-muenchen.de

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