Most decision-making research in economics focuses on individual decisions. Yet, we know, from psychological research in particular, that individual preferences can be sensitive to social pressures. In this paper, we study the impact of a group environment on individual preferences for risky and ambiguous prospects. In our experiment, each participant was invited to make a series of lottery-choice decisions in two different conditions. In the Alone condition, individuals made private choices, whereas in the Group condition, individuals belonged to a three-person (...) group and group members’ choices were aggregated according to either a majority or unanimity rule. This design allows us to study the impact of a group environment on individuals’ attitude towards both risky and ambiguous prospects, while controlling for the decision rule used in the group. Our experimental results show that when individuals are in the Group condition, they tend to be less risk averse and more ambiguity averse than when they are not part of a group. Our experiment also suggests that the decision rule matters as it shows that these two trends tend to be stronger when the group implements a unanimity rule. Specifically, we found that individuals who belong to a group implementing a unanimity rule are significantly less risk averse than individuals who belong to a group that relies on the majority rule. We obtained a similar—but non-significant—result under ambiguity. (shrink)

In the theoretical description of prospect theory, distinct sets of parameters can control the curvature of the value function and the shape of the probability weighting function. There is one for the gain domain and one for the loss domain. However, in most estimations, behaviour over losses is assumed to perfectly reflect behaviour over gains, through a unique set of parameters. We examine the consequences of relaxing this simplifying assumption in the context of Tanaka et al.’s (Am Econ Rev 100(1):557–571, (...) 2010) risk-elicitation procedure based on multiple price lists. We show that subjects’ behaviour for gains is mostly reflected for losses at the aggregate and individual levels, and is consistent with the distinctive prospect theory fourfold pattern. Reflection is only partial as the mean curvature of the value function is slightly less convex for losses than it is concave for gains. These results are robust to a high-stake context. However, we demonstrate that assuming reflection can have huge consequences on loss-aversion measures. Incidentally, we also highlight the existence of a strong, negative and persistent pure loss-frame effect on elicited loss aversion. We recommend that future practitioners and modellers are particularly cautious about the loss-aversion values they obtain or use because these are especially sensitive to parametric assumptions and framing. (shrink)

This article deals with the impact of governmental assistance on insurance demand under ambiguity, i.e., in situations where probabilities are uncertain. First, using a model of insurance demand under ambiguity, we derive theoretical predictions about the impact of several governmental assistance programmes on optimal insurance demand. For example, governmental assistance through a fixed public support scheme implies that partial insurance is always optimal under fair insurance with ambiguity. Second, we present the results of an experiment designed to test these predictions. (...) We find support for several of our theoretical predictions. For example, the presence of governmental assistance through a fixed public support scheme decreases individuals’ willingness to pay to be fully insured. Finally, we compare these results with those obtained for a risk situation. We find that, regardless of the form of governmental assistance, participants in the ambiguity context are consistently willing to pay more to be fully insured than participants in the risk situation. (shrink)