Eliciting risk and time preferences under induced mood states

• We induce subjects into positive or negative mood and jointly estimate their risk and time preferences.
• We compare induced mood with a control group.
• Both mood states increase risk aversion, with a larger effect present for negative mood when there is an intervening stage between mood induction and risk preference elicitation.
• Negative and positive mood states (economically) significantly affect time preferences by increasing patience.

We test whether induced mood states have an effect on elicited risk and time preferences in a conventional laboratory experiment. We jointly estimate risk and time preferences and find that both negative and positive mood states increase patience as well as risk aversion but the magnitude of the effects differs between mood states. Results also suggest that risk preferences are affected by whether a cognitively demanding task precedes a risk preference elicitation task but only when a negative mood was induced.