Comparing Risk Preferences in Choices for Self and Others: An Application of the Multiple Price Lottery Method

Abstract

The current experiment compares risk preference in choices for self and others. The experimental task is based on Holt & Laury (2002) Multiple Price List paradigm. Participants chose among ten sets of gambles. Their choices affected either themselves or other participants in matched reciprocal pairs. Gain and Loss framing varied whether the outcomes of gambles were entirely in the gain domain or if prospects included potential losses. Payoffs are determined based on choices as well as two transparently random numbers, sourced from instant state lottery tickets. Choices for others tended to be somewhat more risk-averse than choices for self. The difference was not significant, although choices for self were significantly risk-averse while choices for others were approximately risk-neutral. Anticipated feedback from recipients also decreased risk taking, although not by a significant margin. Additional studies are proposed to isolate the role of potential losses in choices for and others under uncertainty.

Keywords: Risk Preferences, Other Regarding Preferences, Losses, Agents

JEL Classification: D81, D63, D61