Essays on risk-taking behaviors: An experimental analysis

The effect of competition on risk-taking in contests (with Jan Potters) We investigate, theoretically and experimentally, the effect of competition on risktaking in a contest in which players only decide on the level of risk they wish to take. Taking more risk implies a chance of a higher performance, but also implies a higher chance of failure. We vary the level of competition in two ways: by varying the number of players (2 players versus 8 players), and by varying the sensitivity of the contest to differences in performance (lottery contest versus all-pay auction). Our results show that there is a significant interaction effect between the two treatments, suggesting that players are particularly prone to take more risks if both the number of players and the sensitivity to performance are higher. *************************************************************************************************** Dual-process cognition of risk-taking decisions: an online experiment In this study, we experimentally investigate the role of the mode of cognition on risk taking. In an online experiment, we exogenously manipulate the mode of cognition by means of a motivation treatment, where subjects are required to motivate their choice and, hence, are more likely to make a choice under deliberation. Our results show a significant effect of the motivation treatment on risk-taking, suggesting that subjects are more prone to take risk when deliberation is active. This effect is stronger and more significant if we consider only subjects who have no probabilistic understanding of the decision problem. Based on our experimental findings, we argue that deliberation and comprehension are substitutes when individuals make decisions involving risk. ****************************************************************************************************** The mode of cognition mediates the relationship between personality traits and risk-taking: an online experiment In this study, we experimentally investigate how the mode of cognition mediates the relation between personality traits and risk taking. In an online experiment, the mode of cognition is exogenously manipulated by asking subjects to motivate their choice in order to invoke more deliberative decisions. Although the evidence is not particularly strong, it appears to be suggestive for a role of the mode of cognition in the relation between personality traits and risk-taking behaviors. We find that higher levels of Conscientiousness, Neuroticism and Openness to Experience are associated with a lower degree of risk-taking in the control treatment, and that, in the treatment with motivation, Agreeableness has a qualitatively similar association. Moreover, our experimental results show that risk taking behaviors are more affected by traits of personality when decisions are taken under a more intuitive mode of cognition.