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Deciding for Others Reduces Loss Aversion

  • Andersson, Ola

    ()

    (Research Institute of Industrial Economics (IFN))

  • Holm, Håkan J.

    ()

    (Department of Economics, Lund University)

  • Tyran, Jean-Robert

    ()

    (Department of Economics, University of Vienna)

  • Wengström, Erik

    ()

    (Department of Economics, 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 Lund University, Department of Economics in its series Working Papers with number 2013:30.

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Length: 39 pages
Date of creation: 11 Sep 2013
Date of revision:
Handle: RePEc:hhs:lunewp:2013_030
Contact details of provider: Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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