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Deciding for Others Reduces Loss Aversion

  • Ola Andersson

    (Research Institute of Industrial Economics (IFN))

  • Håkan J. Holm

    (Lund University - Department of Economics)

  • Jean-Robert Tyran

    (Centre for Economic Policy Research (CEPR), University of Vienna, Department of Economics, Copenhagen University)

  • Erik Wengström

    (Department of Economics, Copenhagen 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 University of Copenhagen. Department of Economics in its series Discussion Papers with number 13-09.

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Length: 39 pages
Date of creation: 04 Sep 2013
Date of revision:
Handle: RePEc:kud:kuiedp:1309
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