Decisions under risk in a social and individual context: The limits of social preferences?

• Published in: Journal of behavioral and experimental economics 2015-06, Vol.56, p.62-71
• Main Authors: Linde, Jona, Sonnemans, Joep
• Format: Article
• Language: English
• Subjects: Decision making under risk; Experiment; Fairness; Social preferences
• ISSN: 2214-8043; 2214-8051
• DOI: 10.1016/j.socec.2015.03.003

•Social preference models are originally constructed to explain behavior in distributional games, like the ultimatum or dictator game•But these models are formulated in such a way that they also make predictions for situations in which PRIVATE decisions (with no consequences for others) are made but a social context is present.•We compare decisions in a standard individual decision making setting with decisions in a social context.•We find no difference in behavior in the two treatments.•We conclude that these modelsare less general applicable than their formulation suggests. Social preference models were originally constructed to explain why people spend money to affect the earnings of others. These social preference theories are now widely used to model situations where decision makers do not influence the earnings of others, for example the labor market. Outcome-based social preference models make predictions in these settings as well. We therefore test these models in a novel experimental situation where participants face risky decisions that affect only their own earnings. In the social (individual) treatment participants do (not) observe the earnings of others. In the social treatment gambles therefore not only affect absolute but also relative earnings. All outcome-based social preference models predict a treatment difference. We find that decisions are generally the same in both treatments, which suggests these models are less general applicable than their formulation suggests.