Increased social distance makes people more risk-neutral

Abstract

Individuals are consistently observed to be risk-averse over gains and risk-seeking over losses. This study examined whether increased social distance would change these behavioral patterns. To test our hypothesis, social distance was manipulated by asking the participants to make decisions either for themselves or for another person (Experiment 1), either for a known person or for an unknown person (Experiment 2), and either for a close friend or for a distant friend (Experiment 3). The results of Experiments 1 and 3 showed that increased social distance made people more risk-neutral, and such an effect was stronger in the gain domain than in the loss domain. However, the effect of social distance was not observed in Experiment 2. These findings suggest that risk preferences are influenced by the social distance between decision makers and beneficiaries.

Do we make decisions for other people based on our predictions of their preferences? evidence from financial and medical scenarios involving risk

“…The studies we presented here also manipulated the recipient as a within-subjects factor, which raises the possibility that self-other differences may be contingent on that manipulation. However, similar findings have also been reported using between-subjects designs in both the medical(Zikmund-Fisher et al, 2006;Ubel et al, 2011) and financial domain(Polman, 2012;Pollmann et al, 2014;Sun et al, 2016).THINKING & REASONING…”

“…It has been found that people's surrogate predictions are closer to risk neutrality than the decisions they make for themselves, both in the domain of gains where people were risk averse but predicted someone else to be less risk averse as well as in the domain of losses where people were risk seeking and predicted that someone else would be less risk seeking (Faro & Rottenstreich, 2006;Hadar & Fischer, 2008;Hsee & Weber, 1997;Krishnamurthy & Kumar, 2002). Research has also shown that people's surrogate choices are closer to risk neutrality than the decisions they make for themselves in both gain and loss frames (Batteux, Ferguson, & Tunney, 2017;Sun, Liu, Zhang, & Lu, 2016;Zhang, Liu, Chen, Shang, & Liu, 2017;Ziegler & Tunney, 2015). Such findings suggest that perhaps in a financial context people make surrogate decisions in accordance with their predictions of what that person would do: they predict that person's risk preferences and choose accordingly.…”

The gap between medical and monetary choices under risk persists in decisions for others

“…There is also evidence showing that decisions made for others deviate less from rational choice (i.e., EV maximization) than decisions made for oneself. This has been demonstrated in studies on risk aversion (Sun, Liu, Zhang, & Lu, 2017;Zhang, Liu, Chen, Shang, & Liu, 2017), loss aversion (Andersson, Holm, Tyran, & Wengström, 2013;Mengarelli, Moretti, Faralla, Vindras, & Sirigu, 2014;Pahlke, Strasser, & Vieider, 2012;Zhang et al, 2017), and intertemporal choice (Albrecht, Volz, Sutter, Laibson, & Cramon, 2010). One common explanation for this finding is that decisions for someone else are emotionally less engaging than decisions for oneself, which would allow for a more rational approach to the choice problem (Albrecht et al, 2010;Andersson et al, 2013;Mengarelli et al, 2014;Polman, 2012a;Zhang et al, 2017).…”

“…One yet unpublished study on DfE for others also found no difference in search effort between situations when outcomes affected participants themselves or another participant (Olschewski, Dietsch, & Ludvig, ). Sun et al () investigated choices for self and other in daily‐life decision scenarios involving either monetary gains or losses and found differences in risky choices for self versus others only in the gain domain but not in the loss domain. They explain this finding by an asymmetry in empathizing with others' positive and negative experiences: Empathizing with others' losses seems to be easier than empathizing with other's gains.…”

Decisions for Others Are Less Risk-Averse in the Gain Frame and Less Risk-Seeking in the Loss Frame Than Decisions for the Self

“…Recently, a small research stream has documented individuals’ risk preferences in the gain and loss frames ( Raue et al, 2015 ; Ziegler and Tunney, 2015 ; Sun et al, 2016 ). For example, using social, spatial, and temporal distance to represent psychological distance, Raue et al (2015) investigated undergraduate students’ decisions in psychologically proximal conditions (e.g., imaging being a student, a new flu virus is currently threatening your city) and in psychologically distal conditions (e.g., imaging being a consultant in health care, some countries in the coming months will be threatened by an unusual disease) in both gain (a sure number of people will be saved and a probability that a larger number of people will be saved) and loss frames (a sure number of people will die and a probability that a larger number of people will die).…”