, Volume 43, Issue 3, pp 205-225,
Open Access This content is freely available online to anyone, anywhere at any time.

Risk attitudes in a social context

Abstract

Many experiments have demonstrated that when evaluating payoffs, people take not only their own payoffs into account, but also the payoffs of others in their social environment. Most of this evidence is found in settings where payoffs are riskless. It is plausible that if people care about the payoffs of others, they do so not only in a riskless context, but also in a risky one. This suggests that an individual’s decision making under risk depends on the risks others in his or her environment face. This paper is the first to test whether individuals’ risk attitudes are affected by the risks others face. The results show that risk attitudes appear to be less affected by others’ risks than expected, even though the same subjects do show concerns for inequality in a riskless setting. Interestingly, we find that people prefer risks to be independent across individuals in society rather than correlated.

Kirsten Rohde’s research was made possible through a VENI grant from the Netherlands Organization for Scientific Research (NWO). The authors would like to thank Aurélien Baillon, Jona Linde, Arno Riedl, Joep Sonnemans, Martin Strobel, and Peter P. Wakker for helpful comments. Special thanks go to Burak Can who helped conducting the experiments and shaping our ideas.