Linking Social and Personal Preferences: Theory and Experiment

Abstract

We provide necessary and sufficient conditions for linking preferences for personal and social consumption and attitudes toward risk. We also offer an experimental test of the theory in which subjects were confronted with risky personal choices, riskless social choices, and risky social choices. Revealed preference tests show that subject choices are generally consistent within each choice domain but frequently involve at least some errors. We test for consistency across choice domains using a revealed preference test that accounts for these errors. The choices of a large majority of subjects are consistent with the predictions of our theory.