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Deciding for Others Reduces Loss Aversion

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Author Info

  • Andersson, Ola

    ()
    (Research Institute of Industrial Economics (IFN))

  • Holm, Håkan J.

    ()
    (Lund University)

  • Tyran, Jean-Robert

    ()
    (University of Vienna)

  • Wengström, Erik

    ()
    (Lund University)

Abstract

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.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 976.

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Length: 38 pages
Date of creation: 17 Sep 2013
Date of revision:
Handle: RePEc:hhs:iuiwop:0976

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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Web page: http://www.ifn.se/
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Keywords: Risk taking; Loss aversion; Experiment;

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Cited by:
  1. Natalia Montinari & Michela Rancan, 2013. "Social Preferences under Risk: the Role of Social Distance," Jena Economic Research Papers 2013-050, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Hansen, Fredrik & Anell, Anders & Gerdtham, Ulf-G & Lyttkens, Carl Hampus, 2013. "The Future of Health Economics: The Potential of Behavioral and Experimental Economics," Working Papers 2013:20, Lund University, Department of Economics.
  3. 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 989, Research Institute of Industrial Economics.

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