An Analysis of Heritability in Preferences Using Behavioral Models of Decision Making

Abstract

We investigate the heritability of risk, uncertainty, and time preferences using a large-scale field experiment with adult twins, complemented by a comprehensive meta-analysis of prior studies. Our research introduces a novel empirical approach that integrates behavioral genetics with structural econometrics, enabling us to directly quantify the heritability of latent preference parameters in behavioral models of decision making, without relying on observed proxies. Our incentive-compatible experiment is the first to simultaneously elicit all three types of preferences within the same individuals in a twin study. Our findings reveal a stronger genetic influence on risk and uncertainty preferences than previously reported. We demonstrate that conventional proxy measures for preferences and simplified structural models tend to overstate the influence of unique environmental factors. These results help contextualize preference heterogeneity as a driver of persistent differences in decision making across individuals, leaders, and organizations. This paper was accepted by Aurélien Baillon, behavioral economics and decision analysis. Funding: Support from the University of Technology Sydney and from the Australian Government through the Australian Research Council’s Centre of Excellence for Children and Families over the Life Course [Project IDs CE140100027 and CE200100025] is gratefully acknowledged. This research was facilitated through access to Twins Research Australia, a national resource supported by the National Health & Medical Research Council since 1981, administered by the University of Melbourne. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2025.00669 .