Risky investment decisions: How are individuals influenced by their groups?

Viscusi, W. Kip; Phillips, Owen R.; Kroll, Stephan

doi:10.1007/s11166-011-9123-3

Cited by 62 publications

(50 citation statements)

References 37 publications

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“…Our experiment extends past research on the effect of a group environment on individual attitude to risk and ambiguity (Harrison et al 2007;Masclet et al 2009 ;Curley et al 1986, Trautman et al 2008, Viscusi et al 2011. We observe that individuals who are part of a group (whatever the decision rule) are i) significantly averse to risk, but ii) tend to be less risk averse than when they are alone; and iii) are averse to ambiguity and iv) tend to be more averse to ambiguity than when they are alone.…”

Section: Conclusion and Discussionsupporting

confidence: 85%

“…A growing literature in economics precisely attempts at better understanding how individuals make decisions in a group environment (Harrison et al 2007;Masclet et al 2009;Viscusi et al 2011). Importantly, this literature differs from the literature on group decision making, which focuses on situations where a whole group makes a unique decision after deliberation (Blinder and Morgan 2005;Kocher et al 2006;Baker et al 2008;Shupp and Williams 2008;Ambrus et al 2009;Sheremata and Zhang 2010;Deck et al 2012;Zhang and Casari 2012).…”

Section: Introductionmentioning

confidence: 99%

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Are individuals more risk and ambiguity averse in a group environment or alone? Results from an experimental study

Brunette,

Cabantous,

Couture

2014

Theory Decis

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Most decision-making research in economics focuses on individual decisions. Yet, we know, from psychological research in particular, that individual preferences can be sensitive to social pressures. In this paper, we study the impact of a group environment on individual preferences for risky (i.e., known probabilities) and ambiguous (i.e., unknown probabilities) prospects. In our experiment, each participant was invited to make a series of lottery-choice decisions in two different conditions. In the Alone condition, individuals made private choices whereas in the Group condition, individuals belonged to a three-person group and groupmembers' choices were aggregated according to either a majority or unanimity rule. This design allows us to study the impact of a group environment on individuals' attitude towards both risky and ambiguous prospects while controlling for the decision rule used in the group. Our experimental results show that when individuals are in the Group condition, they tend to be less risk averse and more ambiguity averse than when they are not part of a group (Alone condition). Our experiment also suggests that the decision rule matters as it shows that these two trends tend to be stronger when the group implements a unanimity rule. Specifically, we found that individuals who belong to a group implementing a unanimity rule are significantly less risk averse than individuals who belong to a group that relies on the majority rule. We obtained a similar -but non-significant -result under ambiguity. Permanent repository link

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Section: Conclusion and Discussionsupporting

confidence: 85%

Section: Introductionmentioning

confidence: 99%

Are individuals more risk and ambiguity averse in a group environment or alone? Results from an experimental study

Brunette,

Cabantous,

Couture

2014

Theory Decis

View full text Add to dashboard Cite

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“…In both treatments, risk is found to play a role in the decision to (dis)invest in irrigation technology. However, it is surprising that risk averse farmers invest earlier, which is contradictory to our expectation that higher levels of individual risk aversion lead to later investment (Viscusi et al 2011). A possible explanation for this behaviour may be that more risk averse farmers consider irrigation as a risk management instrument and, therefore, invest earlier than the less risk averse farmers.…”

Section: Test Of H2 'Learning Effect' and H3 'Farmer-specific Effects'contrasting

confidence: 86%

Does timing matter? A real options experiment to farmers' investment and disinvestment behaviours

Ihli

Maart-Noelck

Mußhoff

2013

Aus J Agri & Res Econ

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In this article, we analyse the (dis)investment behaviour of farmers in a within-subject designed experiment. We ascertain whether, and to what extent, the real options approach (ROA) and the classical investment theory can predict farmers' (dis) investment behaviour. We consider a problem of optimal stopping, stylising an option to (dis)invest in agricultural technology. Our results show that both theories do not explain exactly the observed (dis)investment behaviour. However, some evidence was found that the ROA predicted the decision behaviour of farmers better than the classical investment theory. Moreover, we found that farmers learn from repeated investment decisions and consider the value of waiting over time. Socio-demographic and farm-specific variables also affect the (dis)investment behaviour of farmers.

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“…Abdellaoui et al (2008) also found weakly concave utility in combination with weakly prevailing risk seeking for losses. Viscusi et al (2011) showed that observations of other people's choices do influence own decisions even when the own risks are fully known, so that the choices of the other people are not informative. This effect can play a role in our experiment if the experts' information is taken as reflecting the experts' decisions.…”

Section: Summary and Discussion Of Results Of Experiments Amentioning

confidence: 99%

Aggregating imprecise or conflicting beliefs: An experimental investigation using modern ambiguity theories

2012

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Two experiments show that violations of expected utility due to ambiguity, found in general decision experiments, also affect belief aggregation. Hence we use modern ambiguity theories to analyze belief aggregation, thus obtaining more refined and empirically more valid results than traditional theories can provide. We can now confirm more reliably that conflicting (heterogeneous) beliefs where some agents express certainty are processed differently than informationally equivalent imprecise homogeneous beliefs. We can also investigate new phenomena related to ambiguity. For instance, agents who express certainty receive extra weight (a cognitive effect related to ambiguity-generated insensitivity) and generate extra preference value (source preference; a motivational effect related to ambiguity aversion). Hence, incentive compatible belief elicitations that prevent manipulation are especially warranted when agents express certainty. For multiple prior theories of ambiguity, our findings imply that the same prior probabilities can be treated differently in different contexts, suggesting an interest of corresponding generalizations.

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Risky investment decisions: How are individuals influenced by their groups?

Cited by 62 publications

References 37 publications

Are individuals more risk and ambiguity averse in a group environment or alone? Results from an experimental study

Are individuals more risk and ambiguity averse in a group environment or alone? Results from an experimental study

Does timing matter? A real options experiment to farmers' investment and disinvestment behaviours

Aggregating imprecise or conflicting beliefs: An experimental investigation using modern ambiguity theories

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