Are Individuals More Risk and Ambiguity Averse in a Group Environment or Alone? Results from an Experimental Study

36 Pages Posted: 20 Jan 2016

See all articles by Brunette Marielle

Brunette Marielle

LEF-ENGREF-INRA

Laure Cabantous

Cass Business School, City University London

Stephane Couture

ESR-INRA

Date Written: March 1, 2015

Abstract

Most decision-making research in economics focuses on individual decisions. Yet, we know, from psychological research in particular, that individual preferences can be sensitive to social pressures. In this paper, we study the impact of a group environment on individual preferences for risky (i.e., known probabilities) and ambiguous (i.e., unknown probabilities) prospects. In our experiment, each participant was invited to make a series of lottery-choice decisions in two different conditions. In the Alone condition, individuals made private choices whereas in the Group condition, individuals belonged to a three-person group and group-members’ choices were aggregated according to either a majority or unanimity rule. This design allows us to study the impact of a group environment on individuals’ attitude towards both risky and ambiguous prospects while controlling for the decision rule used in the group. Our experimental results show that when individuals are in the Group condition, they tend to be less risk averse and more ambiguity averse than when they are not part of a group (Alone condition). Our experiment also suggests that the decision rule matters as it shows that these two trends tend to be stronger when the group implements a unanimity rule. Specifically, we found that individuals who belong to a group implementing a unanimity rule are significantly less risk averse than individuals who belong to a group that relies on the majority rule. We obtained a similar – but non-significant – result under ambiguity.

Keywords: group, unanimity, majority, preferences, risk, ambiguity

Suggested Citation

Marielle, Brunette and Cabantous, Laure and Couture, Stephane, Are Individuals More Risk and Ambiguity Averse in a Group Environment or Alone? Results from an Experimental Study (March 1, 2015). Theory and Decision, Vol. 78, No. 3, 2015, Available at SSRN: https://ssrn.com/abstract=2718259

Brunette Marielle

LEF-ENGREF-INRA ( email )

14 rue Girardet
Nancy, 54042
France

Laure Cabantous (Contact Author)

Cass Business School, City University London ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Stephane Couture

ESR-INRA

Chemin de Borde-Rouge
Auzeville B.P. 27
Castanet-Tolosan Cedex, 31326
France

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