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Deciding for Others Reduces Loss Aversion

Listed author(s):
  • Andersson, Ola

    ()

    (Research Institute of Industrial Economics (IFN))

  • Holm, Håkan J.

    ()

    (Lund University)

  • Tyran, Jean-Robert

    ()

    (University of Vienna)

  • Wengström, Erik

    ()

    (Lund University)

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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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
Handle: RePEc:hhs:iuiwop:0976
Contact details of provider: Postal:
Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
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