Incidental Emotions and Risk-Taking: An Experimental Analysis
31 Pages Posted: 25 Feb 2017 Last revised: 18 Nov 2017
Date Written: February 24, 2017
In this paper we run a laboratory experiment in order to investigate the impact of incidental emotions on individual risk-taking. In particular, we induce sadness and happiness by means of audiovisual stimuli and compare the subsequent risky choices with the baseline thanks to a between-subjects design. A tweaked version of the Multiple Price List method is used to elicit individual risk preferences in the context of three different lotteries. As main result, the experimental subjects exhibit greater risk aversion under sadness or happiness, than under neutral conditions. Therefore, we explain the fndings through the theory of ego depletion, whereby controlling emotions so as to subsequently process information consumes a limited self-regulatory resource, which is necessary to take risks as well. The outcome is detected in the first lottery but not from the second lottery onwards, probably due to unchecked order effect.
Keywords: laboratory experiment, music, mood induction, preference elicitation, risk aversion
JEL Classification: C91, D81
Suggested Citation: Suggested Citation