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Risking Other People’s Money: Experimental Evidence on Bonus Schemes, Competition, and Altruism

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 in an experiment on a large random sample. The decision makers in our experiment are facing high-powered incentives to increase the risk on behalf of others through hedged compensation contracts or with tournament incentives. Compared to a baseline condition without such incentives, we find that the decision makers respond strongly to these incentives that result in an increased risk exposure of others. However, we find that the increase in risk taking is mitigated by altruistic preferences and pro-social personality traits.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 989.

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Length: 49 pages
Date of creation: 19 Nov 2013
Handle: RePEc:hhs:iuiwop:0989
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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  12. Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
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  18. Barnea, Amir & Cronqvist, Henrik & Siegel, Stephan, 2010. "Nature or nurture: What determines investor behavior?," Journal of Financial Economics, Elsevier, vol. 98(3), pages 583-604, December.
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