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Deciding for Others Reduces Loss Aversion

Author

Listed:
  • Ola Andersson

    (Research Institute of Industrial Economics (IFN))

  • Håkan J. Holm

    (Lund University - Department of Economics)

  • Jean-Robert Tyran

    (Centre for Economic Policy Research (CEPR), University of Vienna, Department of Economics, Copenhagen University)

  • Erik Wengström

    (Department of Economics, Copenhagen 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.

Suggested Citation

  • Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2013. "Deciding for Others Reduces Loss Aversion," Discussion Papers 13-09, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:1309
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    More about this item

    Keywords

    risk taking; loss aversion; experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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