The Influence of Culture on Decision Making Under Risk and Uncertainty
Thesis or dissertation
University of Exeter
I investigate how culture affects decision making under risk and uncertainty through three main strands - social networks, cultural norms and identity, and peer effects. Firstly, I investigate whether students from collectivist cultures form larger networks at university than students from individualist cultures and to what extent these networks are relied on for risk-sharing. Using an online survey, I find that students from collectivist cultures such as China form larger financial risk-sharing networks at university than students from individualist cultures such as Britain. In the financial context, having a larger network increases the willingness to take risks for collectivists but not individualists. On the other hand, students from collectivist cultures are less willing to take risks with their interpersonal relationships than those from individualist cultures. One likely reason for this is that as networks are relied on more for risk-sharing in collectivist cultures, the value of maintaining relationships is increased. Secondly, I run experiments with a stag hunt and bargaining coordination game to see whether cultural norms or identity play a part in coordination decisions. Using a between-subjects design, I vary the identity of the opponent between someone of the same culture or a different culture. I compare the responses of British and Asian students and show the cultural identity of the opponent by physical appearance. The players appear to use cultural stereotypes to predict behaviour, especially in the bargaining game which may require more strategic thought than the stag hunt game. Finally, I investigate cultural differences in conformity in the context of risk attitudes. I expect that people from cultures that value conformity, such as collectivist East Asian cultures, will be more likely to conform to others than people from cultures that value individuality, such as the United Kingdom. My experiment consists of lottery choice tasks, where some students are given information on the choices from a previous session. Again, comparing Asian and British students, I find no difference in the distribution of Asian choices between treatments. However, the British students are inclined to choose against the majority of their peers. This behaviour is consistent with an individualist culture that places value on uniqueness.