Conference Agenda

Often, the consequences of environmental decision-making tend to be highly uncertain. This uncertainty may affect not only decision-makers themselves but also, potentially, bystanders. In this paper, we disentangle how risks to oneself, imposing risky externalities on others, and other-regarding preferences affect individual decision-making through a lab experiment. We find that players are more tolerant towards taking decisions that involve a loss for oneself (a risk to oneself) compared to taking decisions that involve a possible loss for someone else (a risky externality). Further, we find that the combined effect of taking risks and imposing risky externalities dampens an individual's willingness to maximize their profits, suggesting that combining risk and externalities lead prosocial and cautious behavior. Gender-specific analysis reveals that aversion to imposing risky externalities on others is primarily driven by men while the interaction between risk and risky externalities dampens risk-taking primarily among women. We also find men to be more likely to take risks and impose risky externalities on others if others can impose risky externalities on them as well. These findings provide nuanced insights into the behavioral dynamics of risk-aversion and prosociality under complex strategic settings.