Risk Preference Differentials of Small Groups and Individuals

This research compares lottery valuation decisions made by individuals with similar decisions made by small groups. There is an extensive social psychology literature addressing group versus individual decision making but few studies explore this issue in economic contexts with cash rewards. Willingness‐to‐pay data elicited from independent samples of individuals and three‐person groups in a repeated‐measures experimental design reveal that: the variance of risk preferences is generally smaller for groups than individuals and the average group is more risk averse than the average individual in high‐risk situations, but groups tend to be less risk averse in low‐risk situations.