Do affective states influence risk preferences? Evidence from incentive-compatible experiments.

T. Treffers, P.D. Koellinger, A. Picot

Research output: Contribution to JournalArticleAcademicpeer-review

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Abstract

Recent discussions in decision sciences and economics stress the potential
impact of affect on decision outcomes. In this study, we conducted incentive compatible laboratory experiments (N = 253) to investigate whether affect causes
temporary fluctuations in risk preferences. In particular, we employed film clips
to induce participants into joyful, fearful and sad affective states and subsequently elicited risk preferences by asking the participants to make choices among different lotteries. The financial consequences of the lottery choices varied randomly among the fixed-, low-, and high-stakes treatment groups. We find only weak evidence that affective states influence risk preferences. In particular, we find some evidence that sadness leads to risk aversion, but we find no effects for joy and fear. Our findings question recent claims in the literature that the relationship between affect and risk preferences is strong and unambiguous.
Original languageEnglish
Pages (from-to)309-335
Number of pages27
JournalSchmalenbach Business Review
Volume17
Early online date12 Aug 2016
DOIs
Publication statusPublished - 2016

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