Risk ON / Risk OFF: Risk-Taking Varies with Subjectively Preferred and Disliked Music

In this paper we conduct a within-subjects experiment in which teenagers go over 256 gambles with real money gains and losses. For each risky gamble they choose whether to participate in it, or pass. Prior to this main experiment subjects identify specific songs belonging to their favorite musical genre, as well as songs representing a style they dislike. In the main experiment we vary the music playing in the background, so that each subject hears some of their favorite music, and some disliked music, alternating in blocks of 16 gambles. We find that favorite music increases risk-taking ('risk on'), and disliked music suppresses risk-taking ('risk off'), compared to a baseline of no music. Literature in psychology proposes several mechanisms by which mood affects risk-taking, but none of them fully explain the results in our setting. The results are, however, consistent with the economics notion of preference complementarity, extended to the domain of risk preference. The preference structure implied by our results is more complex than previously thought, yet realistic, and consistent with recent theoretical models. More generally, this mechanism offers a potential explanation to why risk-taking is known to change over time and across contexts.