How decision-makers’ sense and state of power induce propensity to take financial risks

Abstract

We present two studies (N1 = 104, and N2 = 359) investigating how sense of power (trait) and state of power affect participants’ risky financial decisions in the domains of investment and gambling. Moreover, we explored whether a situationally induced state of power moderates the relationship between sense of power (trait) and propensity to take financial risks. The studies demonstrated that the level of sense of power was positively associated with the riskiness of investment portfolios and gambling choices. A similar pattern was observed when a state of power/powerlessness was situationally induced: participants in high-power conditions took greater investment and gambling risks than did those in low-power conditions. Importantly, we found an interaction between trait and state power. For participants in the high-power condition, there was a positive relationship between sense of power and propensity to take financial risks. In contrast, there was no such relationship for those in the low-power condition.