Anxiety, Risk Preferences, Betrayal Aversion, and the Growth of Interpersonal Trust

33 Pages Posted: 1 Mar 2014

See all articles by Jason Anthony Aimone

Jason Anthony Aimone

Baylor University - Department of Economics

Sheryl B. Ball

Virginia Polytechnic Institute & State University - Department of Economics

Brooks King-Casas

Virginia Polytechnic Institute & State University - Virginia Tech Carilion Research Institute

Date Written: February 27, 2014

Abstract

Anxiety is often associated with poor economic outcomes, including earning 13% to 18% less than non-anxious peers. On the other hand, few studies explore how anxiety affects an individual’s economic behavior. In part, this is due to a limited focus of clinical research on the impact of psychopathology, more generally, on economic choice. It is also due to the perceived conceptual overlap of anxiety with risk aversion and betrayal aversion, well-known behavioral economic characteristics. Our laboratory experiments disentangle these factors and show that anxiety has an independent effect on decision-making and merits separate theoretical modeling and experimental treatment and investigation. More specifically, we find that anxiety and betrayal aversion independently inhibit the growth of economic trust while greater risk tolerance is associated with an overall increased level of trust. Our findings suggest that anxiety diminishes the ability to adapt in changing social economic environments such as workplaces. In addition, the behavioral regularities that we find provide the foundation for future theoretical modeling.

Keywords: Trust, Anxiety, Betrayal Aversion, Risk Preferences, Experiment

JEL Classification: C91, D03, D81

Suggested Citation

Aimone, Jason Anthony and Ball, Sheryl B. and King-Casas, Brooks, Anxiety, Risk Preferences, Betrayal Aversion, and the Growth of Interpersonal Trust (February 27, 2014). Available at SSRN: https://ssrn.com/abstract=2402413 or http://dx.doi.org/10.2139/ssrn.2402413

Jason Anthony Aimone (Contact Author)

Baylor University - Department of Economics ( email )

P.O. Box 98003
Waco, TX 76798-8003
United States

Sheryl B. Ball

Virginia Polytechnic Institute & State University - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States

Brooks King-Casas

Virginia Polytechnic Institute & State University - Virginia Tech Carilion Research Institute ( email )

2 Riverside Circle
Roanoke, VA 24016
United States

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