Drichoutis, Andreas and Nayga, Rodolfo (2010): Eliciting risk and time preferences under induced mood states.
Download (193Kb) | Preview
We test whether induced mood states have an effect on elicited risk and time preferences in a conventional laboratory experiment. We jointly estimate risk and time preferences and use a mixture specification that allows choices to be consistent with Expected Utility theory or with probability weighting. For choices consistent with Expected Utility Theory, we find that subjects induced into a negative mood exhibit higher risk aversion than those in either the control treatment or the positive mood treatment. For choices that are consistent with probability weighting, we find no effect of mood on risk aversion. Subjects induced into negative mood exhibit lower discount rates. Results also suggest that risk preferences are affected by whether a cognitively demanding task precedes a risk preference elicitation task or whether subjects were placed in a gender-specific session rather than a mixed-gender session.
|Item Type:||MPRA Paper|
|Original Title:||Eliciting risk and time preferences under induced mood states|
|Keywords:||discount rates; risk aversion; lab experiment; mood; affect|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
D - Microeconomics > D0 - General > D00 - General
C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior
|Depositing User:||Andreas Drichoutis|
|Date Deposited:||29. Oct 2011 17:42|
|Last Modified:||16. Feb 2013 05:23|
Allais, M (1953) Le comportement de l'homme rationnel devant le risque: Critique des postulats et axiomes de l'ecole Americaine. Econometrica 21 (4), 503-546.
Andersen, S, GW Harrison, MI Lau, and EE Rutstrom (2008) Eliciting risk and time preferences. Econometrica 76 (3), 583-618.
Andersen, S, GW Harrison, MI Lau, and EE Rutström (2007) Valuation using multiple price list formats. Applied Economics 39 (6), 675-682.
Andersen, S, GW Harrison, MI Lau, and EE Rutström (2010) Discounting behavior: A reconsideration. working paper.
Barone, MJ, PW Miniard, and JB Romeo (2000) The influence of positive mood on brand extension evaluations. The Journal of Consumer Research 26 (4), 386-400.
Benhabib, J, and A Bisin (2005) Modeling internal commitment mechanisms and self-control: A neuroeconomics approach to consumption-saving decisions. Games and Economic Behavior 52 (2), 460-492.
Bernheim, BD, and A Rangel (2004) Addiction and cue-triggered decision processes. American Economic Review 94 (5), 1558-1590.
Bono, JE, and R Ilies (2006) Charisma, positive emotions and mood contagion. The Leadership Quarterly 17 (4), 317-334.
Booth, AL, and PJ Nolen (2009a) Choosing to compete: How different are girls and boys? CEPR Discussion Paper No. 7214, March.
Booth, AL, and PJ Nolen (2009b) Gender differences in risk behaviour: Does nurture matter? CEPR Discussion Paper No. 7198, March.
Bruni, L, and R Sugden (2007) The road not taken: How psychology was removed from economics, and how it might be brought back. The Economic Journal 117 (January), 1-28.
Camerer, CF, G Loewenstein, and M Rabin. (2004) Advances in behavioral economics New Jersey: Princeton University Press
Capra, CM (2004) Mood-driven behavior in strategic interactions. The American Economic Review 94 (2), 367-372.
Capra, CM, K Lanier, and S Meer (2010) The effects of induced mood on bidding in random nth-price auctions. Journal of Economic Behavior & Organization (In press).
Chou, K-L, TMC Lee, and AHY Ho (2007) Does mood state change risk taking tendency in older adults? Psychology and Aging 22 (2), 310-318.
Clarke, KA (2003) Nonparametric model discrimination in international relations. Journal of Conflict Resolution 47 (1), 72-93.
Coller, M, and M Williams (1999) Eliciting individual discount rates. Experimental Economics 2 (2), 107-127.
Curtis, MB (2006) Are audit-related ethical decisions dependent upon mood? Journal of Business Ethics 68 (2), 191-209.
Drichoutis, A.C., Nayga. R.M., Jr., and Klonaris, S. (2011) The Effects of Induced Mood on Preference Reversals and Bidding Behavior in Experimental Auctions. MPRA paper 31085.
de Ruyter, K, and J Bloemer (1998) Customer loyalty in extended service settings. The interaction between satisfaction, value attainment and positive mood. International Journal of Service Industry Management 10 (3), 320-336.
Elster, J (1998) Emotions and economic theory. Journal Article 36 (1), 47-74.
Fehr-Duda, H, T Epper, A Bruhin, and R Schubert (2011) Risk and rationality: The effects of mood and decision rules on probability weighting. Journal of Economic Behavior & Organization 78 (1-2), 14-24.
Fischbacher, U (2007) z-Tree: Zurich Toolbox for Ready-made Economic Experiments. Experimental Economics 10 (2), 171-178.
Forgas, JP (1995) Mood and judgment: The affect infusion model (AIM). Psychological Bulletin 117 (1), 39-66.
Fudenberg, D, and DK Levine (2009) Self control, risk aversion, and the Allais Paradox. Working paper.
Gneezy, U, KL Leonard, and JA List (2009) Gender differences in competition: Evidence from a matrilineal and a patriarchal society. Econometrica 77 (5), 1637-1664.
Grable, JE, and MJ Roszkowski (2008) The influence of mood on the willingness to take financial risks. Journal of Risk Research 11 (7), 905-923.
Harrison, GW (2008) Maximum likelihood estimation of utility functions using Stata. Working Paper 06-12, Department of Economics, College of Business Administration, University of Central Florida.
Harrison, GW, E Johnson, MM McInnes, and EE Rutström (2005) Risk aversion and incentive effects: Comment. The American Economic Review 95 (3), 897-901.
Harrison, GW, MI Lau, and EE Rutstrom (2007) Estimating risk attitudes in Denmark: A field experiment. Scandinavian Journal of Economics 109 (2), 341–368.
Harrison, GW, MI Lau, and EE Rutström (2009) Risk attitudes, randomization to treatment, and self-selection into experiments. Journal of Economic Behavior & Organization 70 (3), 498-507.
Harrison, GW, MI Lau, and MB Williams (2002) Estimating individual discount rates in Denmark: A field experiment. American Economic Review 92 (5), 1606-1617.
Harrison, GW, and JA List (2004) Field experiments. Journal Article 42 (4), 1009-1055.
Harrison, GW, and EE Rutstrom. (2008) Risk aversion in the laboratory. In: J. C. Cox and G. W. Harrison (eds) Research in Experimental Economics Vol 12: Risk Aversion in Experiments. Bingley, UK: Emerald Group Publishing Limited. pp: 41-196
Harrison, GW, and EE Rutström (2009) Expected utility theory and prospect theory: One wedding and a decent funeral. Experimental Economics 12 (2), 133-158.
Hill, RP, and JC Ward (1989) Mood manipulation in marketing research: An examination of potential confounding effects. Journal of Marketing Research 26 (1), 97-104.
Hills, AM, S Hill, N Mamone, and M Dickerson (2001) Induced mood and persistence at gaming. Addiction 96 (11), 1629-1638.
Hockey, GRJ, AJ Maule, PJ Clough, and L Bdzola (2000) Effects of negative mood states on risk in everyday decision making Cognition & Emotion 14 (6), 823-855.
Holt, CA, and SK Laury (2002) Risk aversion and incentive effects. The American Economic Review 92 (5), 1644-1655.
Ifcher, J, and H Zarghamee (2010) Happiness and time preference: The effect of positive affect in a random-assignment experiment. American Economic Review (forthcoming).
Isen, AM, and N Geva (1987) The influence of positive affect on acceptable level of risk: The person with a large canoe has a large worry. Organizational Behavior and Human Decision Processes 39 (145-154).
Isen, AM, and R Patrick (1983) The effect of positive feelings on risk-taking: When the chips are down. Organizational Behavior and Human Performance 31, 194-202.
Izard, CE. (1991) The psychology of emotions. New York: Plenum Press
Johnson, EJ, and A Tversky (1983) Affect, generalization, and the perception of risk. Journal of Personality and Social Psychology 45 (1), 20-31.
Kahneman, D, and A Tversky (1979) Prospect theory: An analysis of decision under risk. Econometrica 47, 263-291.
Kim, MY, and R Kanfer (2009) The joint influence of mood and a cognitively demanding task on risk-taking. Motivation and Emotion 33 (4), 362-372.
Kirchsteiger, G, L Rigotti, and A Rustichini (2006) Your morals might be your moods. Journal of Economic Behavior & Organization 59 (2), 155-172.
Kugler, T, T Connolly, and LD Ordóñez (2010) Emotion, decision, and risk: Betting on gambles versus betting on people. Journal of Behavioral Decision Making (forthcoming).
Larsen, RJ (2000) Toward a science of mood regulation. Psychological Inquiry 11 (3), 129-141.
McLeish, KN, and RJ Oxoby (2007) Gender, affect and intertemporal consistency: An experimental approach. IZA Discussion Paper No. 2663.
Niederle, M, and L Vesterlund (2007) Do women shy away from competition? Do men compete too much? The Quarterly Journal of Economics 122 (3), 1067-1101.
Pelled, LH, and KR Xin (1999) Down and out: An investigation of the relationship between mood and employee withdrawal behavior. Journal of Management 25 (7), 875-895.
Pocheptsova, A, and N Novemsky (2010) When do incidental mood effects last? Lay beliefs versus actual effects. The Journal of Consumer Research 36 (6), 992-1001.
Pugh, DS (2001) Service with a smile: Emotional contagion in the service encounter. Academy of Management Journal 44 (5), 1018-1027.
Pyone, JS, and AM Isen (2011) Positive affect, intertemporal choice, and levels of thinking: Increasing consumers' willingness to wait. Journal of Marketing Research 48 (3), 532-543.
Saha, A (1993) Expo-power utility: A flexible form for absolute and relative risk aversion. American Journal of Agricultural Economics 75 (4), 905-913.
Swinyard, WR (1993) The effects of mood, involvement, and quality of store experience on shopping intentions. The Journal of Consumer Research 20 (2), 271-280.
Swinyard, WR (2003) The effects of salesperson mood, shopper behavior, and store type on customer service. Journal of Retailing and Consumer Services 10 (6), 323-333.
Tversky, A, and D Kahneman (1992) Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty 5 (297-323).
Vuong, QH (1989) Likelihood ratio tests for model selection and non-nested hypotheses. Econometrica 57 (2), 307-333.
Walser, S, and C Eckel (2010) The effect of mood on risk and trust preferences: An experimental study. Working paper Department of Economics, University of Texas at Dallas.
Watson, D (1988) The vicissitudes of mood measurement: Effects of varying descriptors, time frames, and response formats on measures of Positive and Negative Affect. J. Pers. Soc. Psychol. 55 (1), 128-141.
Watson, D, and J Vaidya. (2003) Mood measurement: Current status and future directions. In: J. A. Schinka and W. F. Velicer (eds) Handbook of Psychology, Volume 2: Research Methods in Psychology. New york: Wiley. pp: 351-375
Williams, S, M Zainuba, and R Jackson (2003) Affective influences on risk perceptions and risk intention. Journal of Managerial Psychology 18 (2), 126-137.
Yuen, KSL, and TMC Lee (2003) Could mood state affect risk-taking decisions? Journal of Affective Disorders 75 (1), 11-18.
Available Versions of this Item
Eliciting risk and time preferences under induced mood states. (deposited 27. Aug 2011 12:59)
- Eliciting risk and time preferences under induced mood states. (deposited 29. Oct 2011 17:42) [Currently Displayed]