Are You Risk Averse over Other People's Money?
AbstractDecisions with uncertain outcomes are often made by one party in settings where another party bears the consequences. Whenever an individual is delegated to make decisions that affect others, such as in the typical corporate structure, does the individual make decisions that reflect the risk preferences of the party bearing the consequences? We examine this question in two simple settings, lottery choices and sealed-bid auctions, using controlled laboratory experiments. We find that when an individual makes a decision for an anonymous stranger, there is a tendency to exhibit less risk aversion. This reduction in risk aversion is relative to his or her own preferences, and it is also relative to his or her belief about the preferences of others. This result has significant implications for the design of contracts between principals and agents.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 77 (2011)
Issue (Month): 4 (April)
Other versions of this item:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Dreber, Anna & Rand, David & Wernerfelt, Nils & Worrell, Peter & Zeckhauser, Richard, 2013. "The Decisions of Entrepreneurs and Their Agents: Revealed Levels of Risk Aversion and Betrayal Aversion," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp13-016, Harvard University, John F. Kennedy School of Government.
- Filippin, Antonio & Crosetto, Paolo, 2014.
"A Reconsideration of Gender Differences in Risk Attitudes,"
IZA Discussion Papers
8184, Institute for the Study of Labor (IZA).
- Antonio FILIPPIN & Paolo CROSETTO, 2014. "A Reconsideration of Gender Differences in Risk Attitudes," Departmental Working Papers, Department of Economics, Management and Quantitative Methods at UniversitÃ degli Studi di Milano 2014-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
- Filippin, A. & Crosetto, P., 2014. "A reconsideration of gender differences in risk attitudes," Working Papers, Grenoble Applied Economics Laboratory (GAEL) 2014-01, Grenoble Applied Economics Laboratory (GAEL).
- Kvaløy, Ola & Luzuriaga, Miguel, 2012. "Playing the Trust Game with Other People’s Money," UiS Working Papers in Economics and Finance 2012/17, University of Stavanger.
- Natalia Montinari & Michela Rancan, 2013.
"Social preferences under risk : the role of social distance,"
RSCAS Working Papers, European University Institute
2013/90, European University Institute.
- Natalia Montinari & Michela Rancan, 2013. "Social Preferences under Risk: the Role of Social Distance," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2013-050, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Dinky Daruvala, 2007. "Gender, risk and stereotypes," Journal of Risk and Uncertainty, Springer, Springer, vol. 35(3), pages 265-283, December.
- Carlsson, Fredrik & Daruvala, Dinky & Jaldell, Henrik, 2008. "Do you do what you say or do you do what you say others do?," Working Papers in Economics, University of Gothenburg, Department of Economics 309, University of Gothenburg, Department of Economics.
- Leuermann, Andrea & Roth, Benjamin, 2012. "Does good advice come cheap? - On the assessment of risk preferences in the lab and the field," Working Papers, University of Heidelberg, Department of Economics 0534, University of Heidelberg, Department of Economics.
- Andersson, Ola & Holm, Håkan J. & Tyran, Jean-Robert & Wengström, Erik, 2013. "Risking Other People’s Money: Experimental Evidence on Bonus Schemes, Competition, and Altruism," Working Paper Series, Research Institute of Industrial Economics 989, Research Institute of Industrial Economics.
- Paolo Crosetto & Antonio Filippin & Janna Heider, 2013. "A Study of Outcome Reporting Bias Using Gender Differences in Risk Attitudes," CESifo Working Paper Series 4466, CESifo Group Munich.
- Seda Ertac & Mehmet Y. Gurdal, 2012. "Personality, Group Decision-Making and Leadership," KoÃ§ University-TUSIAD Economic Research Forum Working Papers, Koc University-TUSIAD Economic Research Forum 1227, Koc University-TUSIAD Economic Research Forum.
- Pahlke, Julius & Strasser, Sebastian & Vieider, Ferdinand M., 2012. "Responsibility effects in decision making under risk," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2012-402, Social Science Research Center Berlin (WZB).
- Andrea Leuermann & Benjamin Roth, 2012. "Does Good Advice Come Cheap?: On the Assessment of Risk Preferences in the Lab and in the Field," SOEPpapers on Multidisciplinary Panel Data Research 475, DIW Berlin, The German Socio-Economic Panel (SOEP).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laura Razzolini).
If references are entirely missing, you can add them using this form.