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Deciding for Others Reduces Loss Aversion

Author

Listed:
  • 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.

Suggested Citation

  • Andersson, Ola & Holm, Håkan J. & Tyran, Jean-Robert & Wengström, Erik, 2013. "Deciding for Others Reduces Loss Aversion," Working Paper Series 976, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0976
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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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