New Economics Papers
on Neuroeconomics
Issue of 2013‒11‒16
two papers chosen by

  1. Risk Preferences under Acute Stress By Lubomir Cingl; Jana Cahlikova
  2. The Role of Emotions on Risk Preferences: An Experimental Analysis By Anna Conte; M. Vittoria Levati; Chiara Nardi

  1. By: Lubomir Cingl (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jana Cahlikova (CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Academy of Sciences of the Czech Republic)
    Abstract: Many important decisions are made under stress and they often involve risky alternatives. There has been ample evidence that stress influences decision making in cognitive as well as in affective domains, but still very little is known about whether individual attitudes to risk change with exposure to acute stress. To directly evaluate the causal effect of stress on risk attitudes, we adopt an experimental approach in which we randomly expose participants to a psychosocial stressor in the form of a standard laboratory stress-induction procedure: the Trier Social Stress Test for Groups. Risk preferences are elicited using an incentive compatible task, which has been previously shown to predict risk-oriented behavior out of the laboratory. Using three different measures (salivary cortisol levels, heart rate and multidimensional mood questionnaire scores), we show that stress was successfully induced on the treatment group. Our main result is that acute psychosocial stress significantly increases risk aversion. The effect is mainly driven by males; men in our control group are less risk-averse than women, which is a standard result in the literature, but this difference almost disappears when under psychosocial stress.
    Keywords: risk preferences, stress, Trier Social Stress Test, cortisol
    JEL: C90 C91 D03 D81 D87
    Date: 2013–11
  2. By: Anna Conte (Westminster Business School, University of Westminster, London, and Strategic Interaction Group, Max Planck Institute of Economics, Jena); M. Vittoria Levati (Strategic Interaction Group, Max Planck Institute of Economics, Jena, and Department of Economics, University of Verona); Chiara Nardi (Department of Economics, University of Verona)
    Abstract: In the last decades, there has been a large volume of research showing that emotions do have relevant effects on decision-making. We contribute to this literature by experimentally investigating the impact of four specific emotional states - joviality, sadness, fear, and anger - on risk attitudes. In order to do so, we fit two models of behaviour under risk: the Expected Utility model (EU) and the Rank Dependent Expected Utility model (RDEU), assuming several functional forms of the weighting function. Our results indicate that all emotional states instigate risk-seeking behaviour. Furthermore, we show that there are some differences across gender and across participants' experience in lab experiments.
    Keywords: Risk aversion, Emotions, Structural models
    JEL: D81 C91 D00
    Date: 2013–10–29

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