Social comparison and risky choices

Theories (and experiments) on decision making under risk typically ignore (and exclude) a social context. We explore whether this omission is detrimental. To do so we experimentally investigate the simplest possible situation with both social comparison and risk: participants choose between two lotteries while a referent faces a fixed payoff. Participants are more risk averse when they can earn at most as much as their referent (loss situation) than when they are ensured they will earn at least as much as their referent (gain situation). Prospect theory with a social reference point would predict the exact opposite behavior. These results show that straightforward extensions of existing theories to allow for social comparison do not provide accurate predictions.     

For whom does social comparison induce risk-taking?

A ‘bonus culture’ among financial traders has been blamed for the excessive risk-taking in the run-up to the latest financial crisis. I show that when individuals are more social gain seeking than social loss averse (i.e. gloating is stronger than envy), social comparison predicts more risk-taking as well as a preference for negatively correlated gambles. Testing these two joint propositions in a laboratory experiment, I find that preference for positively or negatively correlated outcomes is highly correlated with risk-taking in a social risky investment task. While only a third of subjects prefer negatively correlated outcomes in a peer comparison setting, in line with relatively stronger social gain seeking, those subjects invest on average 50 % more in a risky gamble in their peer comparison setting than a reference group that made the same decision in an isolated individual setting. Subjects with a preference for positively correlated outcomes, in line with relatively stronger social loss aversion, do not show a higher propensity to invest in a risky gamble compared to the individual reference group.     

Child involvement in treatment planning and assessment in Israel

What can facilitate at‐risk children's involvement in treatment planning and assessment? We examine this question by investigating the perceptions, attitudes, and characteristics of Israeli social workers. We examine whether their seniority, views on the importance of children's participation, and their attitudes toward parents are related to their report of at‐risk children's involvement in treatment planning and placement decisions. At‐risk children's involvement includes preparing them to appear before the committees that handle placement decisions for youth and the social workers' willingness to consider children's opinions. Eighty coordinators of these committees in social services departments in Israel participated. Our findings indicate that, based on the coordinators' answers, at‐risk children are more likely to be involved in treatment planning and assessment committees when the child protection officers prepare parents prior to participating in the committee meetings, and when the coordinators assigned the case are more senior. The influence of children's opinions on the decisions of the committees was predicted by the weight their parents' opinions carried and whether their parents received any relevant materials prior to the committee meetings. Our findings highlight the importance of involving parents in treatment planning and assessment committees' decision making.     

The influence of probabilities on the response mode bias in utility elicitation

The response mode bias, in which subjects exhibit different risk attitudes when assessing certainty equivalents versus indifference probabilities, is a well-known phenomenon in the assessment of utility functions. In this empirical study, we develop and apply a cardinal measure of risk attitudes to analyze not only the existence, but also the strength of this phenomenon. Since probability levels involved in decision problems are already known to have a strong impact on behavior, we use this approach to study the impact of probabilities on the extent of the response mode bias. We find that the direction in which probabilities influence measured risk aversion is the opposite in the certainty equivalence (CE) method versus in the probability equivalence (PE) method. Utilizing the CE elicitation approach leads to an increase of risk seeking for gambles involving high probabilities. For the PE method, subjects tend to behave risk averse with gambles of high probabilities. This behavior is reversed in the gain domain. This “tailwhip” effect is consistently replicated in several experiments, involving both loss and gain domains of lotteries.     

Risk taking after absolute and relative wealth changes: The role of reference point adaptation

We conducted an experiment to compare subjects’ attitudes toward risk before and after they experienced wealth changes induced by a real-effort task. We identified and estimated the subjects’ levels of reference point adaptation to absolute and relative wealth changes. We found that after experiencing a larger loss than others, the subjects did not completely adapt their reference points to the absolute wealth loss and the relative negative wealth gap, and thus significantly increased their risk-taking behavior. However, the subjects also did not adjust their attitudes toward risk after experiencing a smaller loss than others, a smaller gain than others, or a larger gain than others. This may be because they promptly adapted to wealth changes or because they did not adapt to wealth changes but the effects of absolute and relative wealth changes mostly offset each other.     

Dynamic awareness and zero probability beliefs

We study behavioral patterns of insurance demand for low-probability large-loss events (catastrophic losses). Individual patterns of belief formation and risk attitude that were suggested in the behavioral decisions literature emerge robustly in the current set of insurance choices. However, social comparison effects are less robust. We do not find any evidence for peer effects (through social-loss aversion or imitation) on insurance take-up. In contrast, we find support for the prediction that people underweight others’ relevant information in their own decision making.     

Developmental differences in baserate estimates of social behaviors and attitudes

This study examined the development of baserate estimation skills for everyday social events and attitudes. Subjects in grades one, three, and six responded to questions concerning their own rates of behavior and attitudes, and their estimates of baserates of behaviors and attitudes for their classmates. The findings indicate a general increase in accuracy for the estimation of baserates throughout the elementary school years. In addition, younger subjects were less likely to make similar estimates for themselves and their classmates than were older respondents. Developmental changes in estimation accuracy are discussed in relation to task content, use of the response scale, correspondence between self-reports and estimates, and sample variability.     

Risk attitudes in a social context

Many experiments have demonstrated that when evaluating payoffs, people take not only their own payoffs into account, but also the payoffs of others in their social environment. Most of this evidence is found in settings where payoffs are riskless. It is plausible that if people care about the payoffs of others, they do so not only in a riskless context, but also in a risky one. This suggests that an individual’s decision making under risk depends on the risks others in his or her environment face. This paper is the first to test whether individuals’ risk attitudes are affected by the risks others face. The results show that risk attitudes appear to be less affected by others’ risks than expected, even though the same subjects do show concerns for inequality in a riskless setting. Interestingly, we find that people prefer risks to be independent across individuals in society rather than correlated.     

Taste uncertainty and status quo effects in consumer choice

We use reference-dependent expected utility theory to develop a model of status quo effects in consumer choice. We hypothesise that, when making their decisions, individuals are uncertain about the utility that will be yielded by their consumption experiences in different ‘taste states’ of the world. If individuals have asymmetric attitudes to gains and losses of utility, the model entails acyclic reference-dependent preferences over consumption bundles. The model explains why status quo effects may vary substantially from one decision context to another and why some such effects may decay as individuals gain market experience.     

FACTORS AFFECTING THE POST-HOSPITAL CARE PLANNING OF ELDERLY PATIENTS IN AN ACUTE CARE SETTING

Post hospital care decision making is an issue for a vast number of elder persons and yet has received little attention from social work professionals. This paper reviews literature regarding attitudes of professionals, family members and patients themselves toward decision making in a hospital context. Furthermore, an exploratory study involving 40 hospitalized elderly patients highlights the potential risk in limiting patient involvement and identifies implications for practice with the elderly.     

Regret theory and risk attitudes

We examine risk attitudes under regret theory and derive analytical expressions for two components—the resolution and regret premiums—of the risk premium under regret theory. We posit that regret-averse decision makers are risk seeking (resp., risk averse) for low (resp., high) probabilities of gains and that feedback concerning the foregone option reinforces risk attitudes. We test these hypotheses experimentally and estimate empirically both the resolution premium and the regret premium. Our results confirm the predominance of regret aversion but not the risk attitudes predicted by regret theory; they also clarify how feedback affects attitudes toward both risk and regret.     

Dynamics in risk taking with a low-probability hazard

The experiment reported in this paper identifies the effects of experience on revealed attitudes toward risk. Subjects in the experiment encountered an uncertain risk of experiencing a negative income shock over multiple periods and were able to purchase insurance at the start of each period. Subjects engaged in greater risk taking, insuring less frequently, when faced with the same risk over multiple periods. Subjects weighted experienced outcomes proportionately, in a manner consistent with rational Bayesian inference and contrary to the theory that individuals exhibit recency bias. On the other hand, subjects assigned a greater weight to outcomes that directly impacted their earnings compared to observed outcomes that had no effect on income. Unexplained autocorrelation across subjects’ choices suggests that inertia also plays an important role in repeated risk settings. I explore the relevance of these findings to public policy aimed at influencing market outcomes in the presence of infrequent environmental hazards.     

Preferences for information on probabilities versus prizes: The role of risk-taking attitudes

Many real-world decisions entail choices between information on either probabilities or payoffs (i.e., prizes). Simplified versions of such decisions are examined to gain insight into preferences for different types of information as a function of risk-attitudes. General and simple decision rules are derived for cases where the utility function is concave (or convex) over the relevant payoff interval.The article further describes several experiments to test business students' intuitions concerning these optimal decision rules. In general, risk-taking attitudes did not correlate significantly with subjects' preferences for information, in violation of theorems regarding mean-preserving spreads of risk. Other tests, e.g., narrowing certain probability ranges, also resulted in preferences contrary to expected utility (EU) theory.     

Mean-risk decision analysis

Some decision theorists criticize expected utility decision analysis and propose mean-risk decision analysis as a replacement. They claim that expected utility decision analysis neglects attitudes toward risk whereas mean-risk decision analysis accords these attitudes their proper status. However mean-risk decision analysis and expected utility decision analysis are not incompatible, and it is advantageous for decision theory to develop each in a way that complements the other. Here I present a mean-risk rule that governs preferences among options and options given states. This mean-risk rule complements an expected utility rule that takes the utility of an option-state pair as the utility of the option given the state. I argue for the mean-risk rule using principles concerning basic intrinsic desires. The rule is comparative, but the last section offers some suggestions for its quantitative development.I am grateful for comments from my colleague, Henry E. Kyburg, Jr.     

Constructing social work identity based on the reflexive self

Summary In this article, the social work identity is conceptualizedbased on concepts of the self (Benjamin, 1995; Foucault, 1988),rather than concepts associated with ego psychology. Socialwork students, teachers and practitioners have historicallyattempted to gain a sense of ego mastery and control by theacquisition of theory to enhance skill-based practice expertise(Austin, 1952; Zetzel, 1953; Bandler, 1960; Memmot and Brennan,1998). In so doing, they have attempted to manage anxiety asa means to enhance learning. Traditional social work functionssuch as acceptance, non-judgemental attitudes, and empathy (Biestek,1957; Woods and Hollis, 1990) have been utilized to encouragepractitioners to manage their feelings related to difference.We argue, however, that the social work identity is enrichedwhen social workers allow their selves to be in a state of disassemblyin the presence of the other (Smith, 1997). When social workersexperience their selves as complex and dialogical, they aremore open to the influence of the other (Bakhtin, 1993). Wemake the case for practitioners to work on a reflexive selfrather than attempting to achieve ego control through the managementof anxiety.     

Individual vs. couple behavior: an experimental investigation of risk preferences

In this article, we elicit both individuals’ and couples’ preferences assuming prospect theory (PT) as a general theoretical framework for decision under risk. Our experimental method, based on certainty equivalents, allows to infer measurements of utility and probability weighting at the individual level and at the couple level. Our main results are twofold. First, risk attitude for couples is compatible with PT and incorporates deviations from expected utility similar to those found in individual decision making. Second, couples’ attitudes towards risk are found to be consistent with a mix of individual attitudes, women being more influent on couples’ preferences at low probability levels.     

Estimating Risk Attitudes using Lotteries: A Large Sample Approach

Attitudes towards risk play a major role in many economic decisions. In empirical studies it is quite often assumed that attitudes towards risk do not vary across individuals. This paper questions this assumption and analyses which factors influence an individual's risk attitude. Based on questions on lotteries in a large household survey we first semiparametrically estimate an index for risk aversion. We only make weak assumptions about the underlying decision process and our estimation method allows for generalisations of expected utility. We then estimate a structural model based on Cumulative Prospect Theory. Expected utility is strongly rejected and both the value function and the probability weighting function vary significantly with (among other things) age, income, and wealth of the individual.     

The Beckford Report: A Critical Appraisal

Correspondence to Nigel Parton, Department of Behavioural Sciences, The Polytechnic, Queensgate Huddersfield HDI 3DH. Summary This paper provides a critical analysis of the Beckford Reportand its implications for social work and the personal socialservices. Four interrelated themes are explored: the relationshipbetween social work practice, statutory responsibilities andthe law; the attitudes of social workers towards children andfamilies; the social work skills required; and the assumptionsthat are made about child abuse and the role of social workers.This is then related to recent research findings in the areaof policies and decision making in child care. It concludesby arguing that the report is in great danger of misdirectingour attentions from the major issues concerned with social workwith children at risk.     

Observing different orders of risk aversion

A decision maker's attitude towards risk is said to be of orderi, i=1, 2, if for every given riskē with expected value zero, the risk premium the decision maker is willing to pay to avoid the risktē goes witht to zero at the same order ast ⁱ. This article presents an experiment testing the order of decision makers' attitudes toward risk. Its major result is that both attitudes exist, each in significant proportions. Moreover, two classes of first-order behavior are defined. The rank-dependent model (Quiggin, 1982) belongs to one, the disappointment aversion model (Gul, 1991) to the other. We show that only the first of these two classes appears among our subjects.     

Exploring the Gender Gap in Support for a Woman for President

The gender gap in support for a female presidential candidate gathered much media attention with Hillary Clinton as a frontrunner for the 2008 democratic presidential nomination. Two common explanations for this gap are that women have more liberal gender role and political attitudes. We contend that another important, and distinct, factor for heightened support among women is a shared social identity. We tested these three explanations across two studies. In Study 1, hierarchical regression analyses revealed that both attitudes toward women and sex independently predict a significant proportion of the variance in willingness to elect a woman for president. In Study 2, hierarchical regression analyses showed that when entered together, attitudes toward female authority and sex independently predict support, but when political attitudes was entered, only sex and political attitudes predicted support for Clinton. Finally, as expected, when primed with their gender identity, women increased their support for Clinton and men decreased their support, and women perceived her more favorably and men less so. In sum, these studies strongly support the arguments that the gender gap in support for female presidential candidates stems in part from women's more liberal gender role and political attitudes, and also from women sharing the same gender social identity as a female candidate for commander in chief .