Events at CERGE-EI

Prof. Thomas Dohmen

University of Bonn, Germany

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Authors: Si Chen, Thomas Dohmen, Yana Radeva, Anna Schulze Tilling, Elena Shvartsman

Abstract: Understanding how acute stress influences risk-taking behavior is crucial for decision-making in stressful environments, and for understanding how risky choice of the same individual might vary across situations. This study investigates whether the impact of stress on risk-taking varies depending on individuals' risky choice at baseline. We employed a within-subject experimental design, observing participants' risk choices in both gain and loss domains over two sessions: one with induced acute stress and one control. Stress was induced using the Trier Social Stress Test for Groups, with effectiveness confirmed through elevated salivary cortisol, increased heart rate, and higher self-reported stress levels. Our analysis reveals a significant interaction between stress and baseline risk-taking behavior: under stress, individuals became more risk-seeking in choice scenarios in which they made risk-averse choices at baseline, but become more risk-averse in scenarios in which they made risk-seeking choices at baseline. This bidirectional effect suggests that acute stress pushes decision-makers towards risk neutrality. These findings contribute to our understanding of the neuroendocrine impact on decision-making and underscore the importance of considering individual differences when predicting stress effects on risk-taking behavior.