Decision process, preferences over risk and consensus rule: a group experiment

Morone, Andrea and Nuzzo, Simone and Temerario, Tiziana (2017): Decision process, preferences over risk and consensus rule: a group experiment.

Abstract

The recent literature on individual vs. group decisions over risk has brought about divergent results, mainly depending on the institutional rules through which groups take decisions. While some studies where group decisions relied on the majority rule showed no appreciable difference between individuals and groups’ preferences, others where unanimity among group members was required found collective decisions to be less risk averse than individual ones. Of course, these studies share the imposition of a choice rule to determine the groups’ outcome. Alternatively, in the study at hand, we elicited groups’ preferences over risk using a consensus rule, i.e. leaving groups free to endogenously solve the potential disagreement among their members, just as in many real life instances. Our results from a logit regression unambiguously show that individuals’ preferences are systematically further from the risk neutrality than those of groups. In particular, individuals are more risk seeker than groups when facing gambles with positive expected payoff difference and more risk averse in the opposite case.

• Item Type: MPRA Paper
• Language: English
• Keywords: Risk attitudes, group’s behaviour
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior; D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles

References

Ambrus A., Greiner B., Pathak P., “How individual preferences get aggregated in groups - An experimental study”. Journal of Public Economics, 129, 2015, 1–13

Baker, R. J., S. K. Laury, and A. W. Williams. “Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments.” Southern Economic Journal, 75(2), 2008, 367–382.

Brunette, M., Cabantous, L., and Couture, S., “Are individuals more risk and ambiguity averse in a group environment or alone? Results from an experimental study”. Theory and Decision, 78(3), 2015, 357-376.

Charness, G., Rigotti, L. and A. Rustichini. "Individual Behavior and Group Membership." American Economic Review, 97(4), 2007, 1340–1352.

Fischbacher, U. (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental economics, 10(2), 171-178.

Habib, S., Friedman, D., Crockett, S., and James, D. (2016). Payoff and presentation modulation of elicited risk preferences in MPLs. Journal of the Economic Science Association, 1-12.

Hare, A. P., “Consensus versus Majority Vote: A Laboratory Experiment.” Small Group Behavior, 11, 2 (1980), 131-43.

Harrison, G. W., Morten, I. L., Rutström, E. E. and M. Tarazona-Gomez. “Preferences over Social Risk”, Oxford Economic Papers, 65(1), 2012, 25–46.

Holt, C. A. and S. K. Laury. “Risk Aversion and Incentive Effects”, American Economic Review, 92, 2002, 1644–1655.

Masclet, D. Loheac, Y., Denant-Boemont, L. and N. Colombier. “Group and Individual Risk Preferences: a Lottery-Choice Experiment”. Journal of Economic Behavior and Organization, 70(3), 2009, 470–484.

O’Neill, T. A., Hancock, S. E., Zivkov, K., Larson, N. L., and Law, S. J., “Team Decision Making in Virtual and Face-to-Face Environments.” Group Decision and Negotiation, 2015, 1-26.

Rockenbach, B., Sadrieh, A. and B. Mathauschek, B. “Teams take the better risks”. Journal of Economic Behavior and Organization, 63, 2007, 412–22.

Shupp, R.S. and A. W. Williams. “Risk preference differentials of small groups and individuals”, The Economic Journal, 118 (525), 2008, 258–283.

Zhang, J., and M. Casari. "How Groups Reach Agreement In Risky Choices: An Experiment", Economic Inquiry, 50(2), 2012, 502–515