Individual Risk Propensity in a Group Situation ; Cross-Cultural Comparison

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2/26/2015 1 Individual Risk Propensity in a Group Situation ;

1 2/26/ Individual Risk Propensity in a Group Situation ; Cross-Cultural Comparison Dr. S. Choi (s.choi@rug.nl) Faculty of Economics and Business

2 Agenda 2/26/ Research Motivation 2. Literature Review 3. Experimental Design & Analysis points

3 2/26/ Research Motivation

4 Research Motivation Research Title Individual Risk Propensity in a Group Situation ; Cross-Cultural Comparison Risk involves our daily decision makings. It is important to understand risk propensity for further understanding of human economic behaviors. 2/26/2015 4

5 Research Motivation 2/26/ Research Title Individual Risk Propensity in a Group Situation ; Cross- Cultural Comparison Individual and group decisions have a discrepancy in risk propensity. A lot of daily economic choices are done in group. Compare to individual risk propensity, group risk propensity is less explored.

6 Research Motivation 2/26/ Research Title Individual Risk Propensity in a Group Situation ; Cross- Cultural Comparison Although there are universal human behaviors across culture, cross-cultural differences also exist. Hsee and Weber (1999) ; different risk attitude in China vs. USA

7 Research Motivation 2/26/ This study wants to explore the risk propensity differences in individual and group decision making in crosscultural context.

8 2/26/ Literature Review

9 Literature Review 2/26/ Individual vs. Group Situation Individual behave differently when they belong to a group. (Shefrin 2007, Kerr et al., 1996) Group behavior is more close to economic theory predictions than individuals. Ultimatum game (Bornstein and Yaniv 1998) Trust game (Cox 2002, Kugler et al., 2007) Dictator game (Luhan et al., 2009) Coordination game (Kocher and Sutter 2005)

10 Cultural effect on Group decision making? Literature Review 2/26/ Working Paper ; Niebore (2013) : Risk taking in a different group composition/ Nottingham University. East Asian students in his experimental subject group ; Culture does not influence. However, subject students are not representing East Asian culture. Living in UK and exposed to western culture. The time they stayed out of their own culture is not verified.

11 Literature Review 2/26/ Cross-Cultural aspect Germany S. Korea Individual (Hsee and Weber 1999); China / USA Group (Sutter 2009) ; In Jena with German subjects

12 Sutter (2009) Literature Review 2/26/ Individual Behavior and Group Membership Investment game to measure risk propensity (A) X (p= 1/3) (B) 100 X (p= 2/3) Treatments - Individual - Team decision making : one single consented decision - Group membership (Group decision making) : each member makes a decision for the whole members in turn. - Without message exchange - With message exchange - Mixed : Individual-group-individual

13 Sutter (2009) Literature Review 2/26/ In team decision making situation, they behaved more risk seeking than individuals. In group situation, - subjects take more risks than individual situation. - exchanging messages induce risk seeking. - experience of being group affects individual risk attitude even after the dissolution of the group. No significant differences in team and group decision.

14 Sutter (2009) Literature Review 2/26/ In team situation, the decision was more risk seeking than individual.

15 Sutter (2009) Literature Review 2/26/ With message exchange, the degree of risk seeking increased in comparison to noncommunication.

16 Sutter (2009) Literature Review 2/26/ When individual decision and group decisions are mixed, the group decision making experience influences to the following individual decision making.

17 Literature Review 2/26/ Hypothesis When going from individual to group decision making, the difference in risk propensity of Koreans is smaller than that of Germans. ** Since Asians are already more risk seeking. (Hsee & Weber 1999)

18 Literature Review 2/26/ Cross-Cultural aspect Germany S. Korea Individual (Hsee and Weber 1999); China / USA Group (Sutter 2009) ; In Jena with German subjects

19 2/26/ Experimental Design & Analysis Points

20 Basic Model Gnezzy and Potters (1999) & Sutter (2009) Investment game (A) X (p= 1/3) (B) 100 X (p= 2/3) Treatment Individual Team decision with communication Implement Z-tree South Korea / Germany? Experimental Design 2/26/

21 Experimental Design 2/26/ Specific design for each treatment Individual One-Shot game with 100 points They only can invest up to 100 points in each round They can see the investment result every round Team decision with communication Unlike Sutter (2009), each subjects play the investment game as one-shot game. Three subjects are randomly allocated in a group. All rules are same to the individual session. Three subjects can exchange nonbinding messages. They should make a one consented decision for investment to move to next round.

22 Questionnaire Experimental Design 2/26/ Demographic questions Cognitive skill : CRT (?) Personality scales : Brandstätter (1988)

23 Analytical Points 2/26/ ) Individual vs. group decision making in South Korea 2) Degree of change from Individual to group decision making in Germany and S. Korea 3) Who drives decision making process? Risk seeker? More intelligent subject? More extrovert subject?

24 END 2/26/

Searching for a better deal On the influence of team decision making, time pressure and gender *

Searching for a better deal On the influence of team decision making, time pressure and gender * Marcela Ibanez University of Göteborg and University of Innsbruck Simon Czermak University of Innsbruck