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Investment in Risk Protection and Social Preferences: An Experimental Study

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  • Federico Fornasari
  • Matteo Ploner
  • Ivan Soraperra

Abstract

We investigate investment in risk protection when risk affects either the decision maker or another individual and when the cost to offset risk is borne either by the decision maker or by another individual. We assess be- havior in the experiment against predictions obtained from a well-known social preferences model. In line with our predictions, we find that in- dividuals invest more of others� resources than of their own resources to protect themselves, and individuals invest more of their own resources in risk protection when risk is borne by themselves than when risk is borne by the others. Furthermore, individuals invest more in risk protection when delegated to choose for others than when choosing for themselves.

Suggested Citation

  • Federico Fornasari & Matteo Ploner & Ivan Soraperra, 2015. "Investment in Risk Protection and Social Preferences: An Experimental Study," CEEL Working Papers 1503, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    • Handle: RePEc:trn:utwpce:1503
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    File URL: http://www-ceel.economia.unitn.it/papers/papero15_03.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    social preferences; risk; laboratory experiments; delegated choice;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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