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.