Stress and Risk - Preferences and Noise
69 Pages Posted:
Date Written: November 16, 2020
We analyze the impact of acute stress on risky choice in a laboratory experiment with 194 participants. We disentangle errors in decision making from an actual shift in preferences between our experimental treatments without the induction of stress and under stress. Our findings reveal that preferences are stable across conditions. Noise is very low and not significantly different between conditions. Structural estimations show that the noise in decision making mostly stems from errors of a Fechner structure. Additionally, we find statistically significant evidence for lower cognitive abilities being correlated with more noise in decision-making in general, however, independent of treatment.
Keywords: risk preferences, risk aversion, stress, laboratory stressor, Trier social stress test, cortisol
JEL Classification: C91, D81, D87
Suggested Citation: Suggested Citation