Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments

Lottery-choice experiments are conducted to compare risk preferences revealed by three-person groups versus isolated individuals. A lottery-choice experiment consists of a menu of paired lottery choices structured so that the crossover point from a low-risk to a high-risk lottery can be used to infer the degree of risk aversion. The data from a between-subjects experiment indicate that the difference in the average crossover point for groups versus individuals is not significant, but groups tend to make decisions that are more consistent with risk-neutral preferences in the lowest and highest risk lotteries. The data from a three-phase individualgroup- individual sequenced experiment indicate that groups choose significantly more low-risk lotteries than the mean choice of the individual group members. Also, making a phase 2 group decision influences the subsequent phase 3 individual decisions toward the group decision relative to the initial phase 1 (individual) decisions.