Social Preferences Under Risk: Minimizing Collective Risk vs. Reducing Ex-Post Inequality

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We refine the understanding of individual preferences across social lotteries, whereby the payoffs of a pair of subjects are exposed to random shocks. We find that aggregate behavior is ex-post and ex-ante inequality averse, but also that there is a wide variety of individual preferences and that the majority of subjects are indifferent to social concerns under risk. Furthermore, we determine whether subjects are averse to collective risk -the variability in the sum of payoffs of the pair. We do so by varying the presentation of payoffs. They are shown side by side in one treatment and added-up in the other. The first presentation draws attention to inequality in payoffs, the second to collective risk. We find that subjects dislike lotteries that lead to ex-post unequal distributions of payoffs in both cases and that emphasizing collective risk changes choice only marginally and not significantly, though in the direction of collective risk reduction. We conclude that ex-post inequality aversion is the primary concern in the evaluation of social lotteries while collective risk is only of secondary interest. The literature about social preferences under risk explores whether social considerations affect risk attitudes. Indeed, risk does not play out in a social vacuum. Taking risks exposes people to changes in their position in the hierarchy of wealth. Some risks are systematic, that is, they affect the collective outcomes of a community but not the distribution of wealth within it. Other risks are idiosyncratic as they affect only some agents while others remain safe. A final class of risks leads to a redistribution of wealth within a community without affecting that community's total welfare. Terms of use: Documents inThe experimental study of behavior under risk has been recently extended by outlining explicitly, when presenting a risky situation, how the risk affects not only the decision-maker's payoffs but also the payoffs of others. The literature explores whether people are more risk averse when a peer is not exposed to risk, whether they are more risk averse when deciding about the exposure to risk of others than when deciding about their own exposure, whether subjects tend to take more risk if that can allow them to catch-up with their peers, and whether subjects dislike risk that could affect Contribution This paper makes two main contributions. A first contribution is to refine established findings about social preferences under risk. We do so b...

Selfish risk-seeking can provide an evolutionary advantage in a conditional public goods game

“…In the specific case of selfishness, self-enhancing traits are usually detrimental for the growth of the community as a whole. On the other hand, the evidence for the impact of risk preferences on group fitness is more mixed [17,18].…”