Giving in the Face of Risk

Elena Cettolin, Arno Riedl, Thu Giang Tran

Research output: Working paperProfessional

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Abstract

The decision how to share resources with others often needs to be taken under uncertainty on its allocational consequences. Although risk preferences are likely important, existing research is silent about how social and risk preferences interact in such situations. In this paper we provide experimental evidence on this question. In a first experiment givers are not exposed to risk while beneficiaries’ final earnings may be larger or smaller than the allocation
itself, depending on the realized state of the world. In a second experiment, risk affects the earnings of givers but not of beneficiaries. We find that individuals’ risk preferences are predictive for giving in both experiments. Increased risk exposure of beneficiaries tends to decrease giving whereas increased risk exposure of givers has no effect. Giving under risk is
strongly correlated with giving in the absence of risk. We find limited support for existing models of ex-post and ex-ante fairness. Our results point to the importance of incorporating risk preferences in models of social preferences.
Original languageEnglish
PublisherMaastricht University, Graduate School of Business and Economics
DOIs
Publication statusPublished - 2016

Publication series

SeriesGSBE Research Memoranda
Number035

JEL classifications

  • c91 - Design of Experiments: Laboratory, Individual
  • d03 - Behavioral Economics: Underlying Principles
  • d64 - "Altruism; Philanthropy"
  • d81 - Criteria for Decision-Making under Risk and Uncertainty

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