How do risk attitudes affect pro-social behavior? Theory and experiment

We explore how risk preferences affect pro-social behavior under uncertainty. We analyze a modified dictator game in which the dictator can, by reducing her own sure payoff, increase the odds that an unknown recipient wins a lottery. We first augment a standard social preferences model with reference-dependent risk attitudes and then test the model’s predictions for the dictator’s giving behavior using a laboratory experiment. Consistent with the predictions of the model, we find that the relationship between giving behavior and a giver’s loss aversion is mediated by the strength of the giver’s pro-social preferences. Among more (less) pro-social dictators, an increase in loss aversion increases (decreases) the likelihood that a dictator contributes to a recipient.