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Risk preferences under acute stress

Published online by Cambridge University Press:  14 March 2025

Jana Cahlíková  and
Lubomír Cingl
Jana Cahlíková
Affiliation:
Department of Public Economics, Max Planck Institute for Tax Law and Public Finance, Marstallplatz 1, 80539 Munich, Germany CERGE-EI, a joint workplace of Charles University in Prague and the Economics Institute of the Czech Academy of Sciences, Politických vězňů 7, 111 21 Prague, Czech Republic
Lubomír Cingl*
Affiliation:
Faculty of Social Sciences, Institute of Economic Studies, Charles University in Prague, Opletalova 26, 110 00 Prague 1, Czech Republic Department of Institutional, Environmental and Experimental Economics, Faculty of Economics, University of Economics in Prague, Nam. Winstona Churchilla 4, 130 67 Prague, Czech Republic
*
lubomir.cingl@vse.cz
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Abstract

Many important decisions are made under stress and they often involve risky alternatives. There has been ample evidence that stress influences decision making, but still very little is known about whether individual attitudes to risk change with exposure to acute stress. To directly evaluate the causal effect of psychosocial stress on risk attitudes, we adopt an experimental approach in which we randomly expose participants to a stressor in the form of a standard laboratory stress-induction procedure: the Trier Social Stress Test for Groups. Risk preferences are elicited using a multiple price list format that has been previously shown to predict risk-oriented behavior out of the laboratory. Using three different measures (salivary cortisol levels, heart rate and multidimensional mood questionnaire scores), we show that stress was successfully induced on the treatment group. Our main result is that for men, the exposure to a stressor (intention-to-treat effect, ITT) and the exogenously induced psychosocial stress (the average treatment effect on the treated, ATT) significantly increase risk aversion when controlling for their personal characteristics. The estimated treatment difference in certainty equivalents is equivalent to 69 % (ITT) and 89 % (ATT) of the gender-difference in the control group. The effect on women goes in the same direction, but is weaker and insignificant.

Keywords

Risk preferencesRisk aversionStressLaboratory stressorTrier social stress testCortisol

JEL classification

D87: Neuroeconomics C91: Laboratory, Individual Behavior D81: Criteria for Decision-Making under Risk and Uncertainty
Type
Original Paper
Information
Experimental Economics , Volume 20 , Issue 1 , March 2017 , pp. 209 - 236
Copyright
Copyright © 2016 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-016-9482-3) contains supplementary material, which is available to authorized users.

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