ESSAYS ON DECISION MAKING UNDER RISK

Abstract

This thesis consists of two chapters on decision-making under risk. The first chapter examines the relationship between risk perception and the individualist-collectivist continuum across the world. We use a dataset from the Lloyd’s Register Foundation World Risk Poll and find that people from countries with a more individualist culture perceive lower risk after controlling for personal experiences. A similar but weaker association is observed in migrant data and when using historical kinship tightness to proxy for individualism. The second chapter investigates the influence of recommendation algorithms on decision-making under risk. We conduct a large-scale randomized controlled experiment where subjects make risky decisions. Subjects being treated receive algorithmic recommendations based on the decisions of the majority, their own past decisions, and the decisions of similar subjects. We find that subjects are willing to follow recommendations and pay to receive them. Consequently, recommendation algorithms reduce noises, shape preferences, and increase decision speed.