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Risk-taking with Other People’s Money

Listed author(s):
  • Kvaløy, Ola

    ()

    (UiS)

  • Eriksen, Kristoffer

    ()

    (UiS)

  • Luzuriaga , Miguel

    ()

    (UiS)

We present an experimental study on how people take risk with other people’s money. We use three different elicitation methods, and study how each subject makes decisions both on behalf of own money and on behalf of another individual’s money. We find that a majority of subjects make different decisions on behalf of others than on behalf of themselves. Approximately one third of the subjects increase risk-taking when it is on behalf of another subject, while one third reduces risk-taking. In sum, we find a weak tendency of lower risk-taking with other’s money compared with own money. We also find that subjects on average think that others are more risk averse than themselves. Moreover, subjects believe that other participants take less risk with their own money than with other people’s money.

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File URL: https://dl.dropboxusercontent.com/u/8078351/uis_wps_econ_fin/uis_wps_2014_21_eriksen_kvaloy_luzuriaga.pdf
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Paper provided by University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2014/21.

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Length: 24 pages
Date of creation: 20 Nov 2014
Handle: RePEc:hhs:stavef:2014_021
Contact details of provider: Postal:
University of Stavanger, NO-4036 Stavanger, Norway

Web page: http://www.uis.no/research/economics_and_finance

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  3. Catherine C. Eckel & Philip J. Grossman, 2002. "Sex Differences and Statistical Stereotyping in Attitudes Toward Financial Risk," Monash Economics Working Papers archive-03, Monash University, Department of Economics.
  4. Sujoy Chakravarty & Glenn W. Harrison & Ernan E. Haruvy & E. Elisabet Rutström, 2011. "Are You Risk Averse over Other People's Money?," Southern Economic Journal, Southern Economic Association, vol. 77(4), pages 901-913, April.
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  11. Andersson, Ola & Holm, Håkan J. & Tyran, Jean-Robert & Wengström, Erik, 2013. "Risking Other People’s Money: Experimental Evidence on Bonus Schemes, Competition, and Altruism," Working Paper Series 989, Research Institute of Industrial Economics.
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  15. Dinky Daruvala, 2007. "Gender, risk and stereotypes," Journal of Risk and Uncertainty, Springer, vol. 35(3), pages 265-283, December.
  16. Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
  17. Chetan Dave & Catherine Eckel & Cathleen Johnson & Christian Rojas, 2010. "Eliciting risk preferences: When is simple better?," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 219-243, December.
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