Deciding for Others Reduces Loss Aversion

Ola Andersson; Håkan J. Holm; Jean-Robert Karl Tyran; Erik Roland Wengström

doi:10.1287/mnsc.2014.2085

Deciding for Others Reduces Loss Aversion

Ola Andersson, Håkan J. Holm, Jean-Robert Karl Tyran, Erik Roland Wengström

63 Citationer (Scopus)

Abstract

We study risk taking on behalf of others, both when choices involve losses and when they do not. A large-scale incentivized experiment with subjects randomly drawn from the Danish population is conducted. We find that deciding for others reduces loss aversion. When choosing between risky prospects for which losses are ruled out by design, subjects make the same choices for themselves as for others. In contrast, when losses are possible, we find that the two types of choices differ. In particular, we find that subjects who make choices for themselves take less risk than those who decide for others when losses loom. This finding is consistent with an interpretation of loss aversion as a bias in decision making driven by emotions and that these emotions are reduced when making decisions for others.

Originalsprog	Engelsk
Tidsskrift	Management Science
Vol/bind	62
Udgave nummer	1
Sider (fra-til)	29-36
Antal sider	9
ISSN	0025-1909
DOI	https://doi.org/10.1287/mnsc.2014.2085
Status	Udgivet - jan. 2016

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10.1287/mnsc.2014.2085

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abstract = "We study risk taking on behalf of others, both when choices involve losses and when they do not. A large-scale incentivized experiment with subjects randomly drawn from the Danish population is conducted. We find that deciding for others reduces loss aversion. When choosing between risky prospects for which losses are ruled out by design, subjects make the same choices for themselves as for others. In contrast, when losses are possible, we find that the two types of choices differ. In particular, we find that subjects who make choices for themselves take less risk than those who decide for others when losses loom. This finding is consistent with an interpretation of loss aversion as a bias in decision making driven by emotions and that these emotions are reduced when making decisions for others.",

author = "Ola Andersson and Holm, {H{\aa}kan J.} and Tyran, {Jean-Robert Karl} and Wengstr{\"o}m, {Erik Roland}",

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AU - Andersson, Ola

AU - Holm, Håkan J.

AU - Tyran, Jean-Robert Karl

AU - Wengström, Erik Roland

N1 - the article has appeared in print 2016 (electronic pre-print is 2014)

PY - 2016/1

Y1 - 2016/1

N2 - We study risk taking on behalf of others, both when choices involve losses and when they do not. A large-scale incentivized experiment with subjects randomly drawn from the Danish population is conducted. We find that deciding for others reduces loss aversion. When choosing between risky prospects for which losses are ruled out by design, subjects make the same choices for themselves as for others. In contrast, when losses are possible, we find that the two types of choices differ. In particular, we find that subjects who make choices for themselves take less risk than those who decide for others when losses loom. This finding is consistent with an interpretation of loss aversion as a bias in decision making driven by emotions and that these emotions are reduced when making decisions for others.

AB - We study risk taking on behalf of others, both when choices involve losses and when they do not. A large-scale incentivized experiment with subjects randomly drawn from the Danish population is conducted. We find that deciding for others reduces loss aversion. When choosing between risky prospects for which losses are ruled out by design, subjects make the same choices for themselves as for others. In contrast, when losses are possible, we find that the two types of choices differ. In particular, we find that subjects who make choices for themselves take less risk than those who decide for others when losses loom. This finding is consistent with an interpretation of loss aversion as a bias in decision making driven by emotions and that these emotions are reduced when making decisions for others.

U2 - 10.1287/mnsc.2014.2085

DO - 10.1287/mnsc.2014.2085

M3 - Journal article

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VL - 62

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EP - 36

JO - Management Science

JF - Management Science

IS - 1

ER -

Deciding for Others Reduces Loss Aversion

Abstract

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