Risk Preferences of Individuals and Groups in Time-Dependent Decisions

Posted: 15 Sep 2016 Last revised: 30 Sep 2021

See all articles by Marie-Louise Matthiesen

Marie-Louise Matthiesen

RWTH Aachen University - Department of Finance

Bertram I. Steininger

Royal Institute of Technology (KTH)

Date Written: September 30, 2021

Abstract

We investigate whether the risk preferences of individuals and groups are dependent on reward delay. For that, we run a lottery-choice experiment, where payments are made either directly or at a later time (3, 9, or 18 months). We find that groups make more risk-averse decisions than individuals do in the present. This relation reverses for later payments, with groups becoming less risk-averse and reaching almost risk neutrality at 18 months. We present a parameterization of the probability time trade-off model extended by the probability of prospect survival and show that our results are consistent with the affect-based reasoning explanation.

Keywords: Risk Preferences, Time Preferences, Individuals, Groups

JEL Classification: C91, C92, D01, D81, D91

Suggested Citation

Matthiesen, Marie-Louise and Steininger, Bertram I., Risk Preferences of Individuals and Groups in Time-Dependent Decisions (September 30, 2021). Available at SSRN: https://ssrn.com/abstract=2838859 or http://dx.doi.org/10.2139/ssrn.2838859

Marie-Louise Matthiesen (Contact Author)

RWTH Aachen University - Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany

Bertram I. Steininger

Royal Institute of Technology (KTH) ( email )

Stockholm
Sweden

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