How do risk attitudes affect pro-social behavior? Theory and experiment
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How do risk attitudes affect pro-social behavior? Theory and experiment Sean Fahle1
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Santiago I. Sautua2
Accepted: 26 October 2020 Ó Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract We explore how risk preferences affect pro-social behavior under uncertainty. We analyze a modified dictator game in which the dictator can, by reducing her own sure payoff, increase the odds that an unknown recipient wins a lottery. We first augment a standard social preferences model with reference-dependent risk attitudes and then test the model’s predictions for the dictator’s giving behavior using a laboratory experiment. Consistent with the predictions of the model, we find that the relationship between giving behavior and a giver’s loss aversion is mediated by the strength of the giver’s pro-social preferences. Among more (less) pro-social dictators, an increase in loss aversion increases (decreases) the likelihood that a dictator contributes to a recipient. Keywords Other-regarding preferences Pro-social behavior Reference-dependent preferences Risk
We thank Greg Sacks for insightful conversations at the beginning of this project, and an associate editor, two anonymous referees, Ori Heffetz, Ted O’Donoghue, Erkut Ozbay, Guillem Roig, Chad Stecher, and Kyle Woodward for helpful comments and suggestions. We also thank the audiences at the 2017 ESA World Meeting, the Experimental and Behavioral Economics Workshop at Universidad del Rosario, the Bogota´ Experimental and Behavioral Economics Seminar (BEBES), Universidad Nacional de Colombia, Universidad de los Andes, and Cornell University for their feedback. Laura Correa provided excellent research assistance. For valuable assistance in the laboratory sessions, we also thank Laura Becerra and Yuliet Verbel. Sautua thanks Universidad del Rosario for financial support. Fahle acknowledges funding from the Alfred P. Sloan Foundation (Grant G-2015-14131). Electronic Supplementary Material The online version of this article (https://doi.org/10.1007/s11238020-09788-8) contains supplementary material, which is available to authorized users. & Santiago I. Sautua [email protected] Sean Fahle [email protected] Extended author information available on the last page of the article
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S. Fahle, S. I. Sautua
1 Introduction Individuals often undertake pro-social behavior even when its effectiveness is uncertain. As an example, consider the situation of a teacher choosing whether to expend time and energy to provide extra after-hours help to a struggling student. On the one hand, by helping the student, the teacher incurs a certain cost in terms of her forgone time. On the other hand, the benefit to the student is uncertain: the teacher is only able to improve the student’s chances of a successful outcome. Similar situations are common and include physicians performing risky operations for patients and parents making risky investments in their children. In this paper, we are concerned with how th
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