Deciding for Others Reduces Loss Aversion

TY - UNPB

T1 - Deciding for Others Reduces Loss Aversion

AU - Andersson, Ola

AU - Holm, Håkan J.

AU - Tyran, Jean-Robert Karl

AU - Wengström, Erik Roland

N1 - JEL classification: C91; D03; D81; G02

PY - 2013

Y1 - 2013

N2 - We study risk taking on behalf of others, both with and without potential losses. A large-scale incentivized experiment is conducted with subjects randomly drawn from the Danish population. On average, decision makers take the same risks for other people as for themselves when losses are excluded. In contrast, when losses are possible, decisions on behalf of others are more risky. Using structural estimation, we show that this increase in risk stems from a decrease in loss aversion when others are affected by their choices.

AB - We study risk taking on behalf of others, both with and without potential losses. A large-scale incentivized experiment is conducted with subjects randomly drawn from the Danish population. On average, decision makers take the same risks for other people as for themselves when losses are excluded. In contrast, when losses are possible, decisions on behalf of others are more risky. Using structural estimation, we show that this increase in risk stems from a decrease in loss aversion when others are affected by their choices.

KW - Faculty of Social Sciences

KW - Risk taking

KW - loss aversion

KW - experiment

M3 - Working paper

T3 - University of Copenhagen. Institute of Economics. Discussion Papers

BT - Deciding for Others Reduces Loss Aversion

PB - Økonomisk institut, Københavns Universitet

CY - Kbh

ER -