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Risk Preferences and the Role of Emotions

Economica / NEW SERIES

Published online on

Abstract

There is a large volume of research showing that emotions have relevant effects on decision‐making. We contribute to this literature by experimentally investigating the impact of four specific emotional states—joviality, sadness, fear and anger—on risk attitudes. In order to do so, we fit two models of behaviour under risk: the expected utility model and the rank dependent expected utility model, assuming several functional forms of the weighting function. Our results indicate that all emotional states mitigate risk aversion. Furthermore, we show that there are some differences across gender and participants’ experience in laboratory experiments.