Risk Preferences of Individuals and Groups in Time-Dependent Decisions
Posted: 15 Sep 2016 Last revised: 30 Sep 2021
Date Written: September 30, 2021
Abstract
We investigate whether the risk preferences of individuals and groups are dependent on reward delay. For that, we run a lottery-choice experiment, where payments are made either directly or at a later time (3, 9, or 18 months). We find that groups make more risk-averse decisions than individuals do in the present. This relation reverses for later payments, with groups becoming less risk-averse and reaching almost risk neutrality at 18 months. We present a parameterization of the probability time trade-off model extended by the probability of prospect survival and show that our results are consistent with the affect-based reasoning explanation.
Keywords: Risk Preferences, Time Preferences, Individuals, Groups
JEL Classification: C91, C92, D01, D81, D91
Suggested Citation: Suggested Citation