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Risk taking for oneself and others: A structural model approach

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  • Vieider, Ferdinand M.
  • Villegas-Palacio, Clara
  • Martinsson, Peter
  • Mejía, Milagros

Abstract

We examine situations in which a decision maker decides for another person as well as herself under conditions of payoff equality, and compare such decisions under responsibility to individual decisions. Estimating a structural model we find that responsibility leaves utility curvature unaffected, but accentuates the subjective distortion of very small and very large probabilities for both gains and losses. This results in an accentuation of prospect theory's four-fold pattern of risk preferences under responsibility. In addition, we also find that responsibility reduces loss aversion according to some common definitions of the latter. These results serve to reconcile some of the still largely contradictory findings in the literature on decisions for oneself and others under payoff equality.

Suggested Citation

  • Vieider, Ferdinand M. & Villegas-Palacio, Clara & Martinsson, Peter & Mejía, Milagros, 2015. "Risk taking for oneself and others: A structural model approach," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2015-401, WZB Berlin Social Science Center.
  • Handle: RePEc:zbw:wzbrad:spii2015401
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    Cited by:

    1. Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2016. "Deciding for Others Reduces Loss Aversion," Management Science, INFORMS, vol. 62(1), pages 29-36, January.
    2. Alexia Gaudeul, 2013. "Social preferences under uncertainty," Jena Economic Research Papers 2013-024, Friedrich-Schiller-University Jena.
    3. M. Vittoria Levati & Stefan Napel & Ivan Soraperra, 2017. "Collective Choices Under Ambiguity," Group Decision and Negotiation, Springer, vol. 26(1), pages 133-149, January.
    4. repec:eee:soceco:v:69:y:2017:i:c:p:92-98 is not listed on IDEAS
    5. Stephan Jagau & Theo Offerman, 2018. "Defaults, normative anchors, and the occurrence of risky and cautious shifts," Journal of Risk and Uncertainty, Springer, vol. 56(3), pages 211-236, June.
    6. repec:kap:expeco:v:21:y:2018:i:2:d:10.1007_s10683-017-9541-4 is not listed on IDEAS
    7. repec:kap:jrisku:v:54:y:2017:i:1:d:10.1007_s11166-017-9252-4 is not listed on IDEAS
    8. repec:eee:soceco:v:68:y:2017:i:c:p:53-61 is not listed on IDEAS
    9. Jan (J.P.M.) Heufer & Jason Shachat & Yan Xu, 2018. "Measuring tastes for equity and aggregate wealth behind the veil of ignorance," Tinbergen Institute Discussion Papers 18-087/I, Tinbergen Institute.
    10. repec:kap:jrisku:v:55:y:2017:i:1:d:10.1007_s11166-017-9266-y is not listed on IDEAS
    11. Christoph Engel & Alexandra Fedorets & Olga Gorelkina, 2018. "How Do Households Allocate Risk?," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2018_14, Max Planck Institute for Research on Collective Goods.
    12. Xu, Yilong & Xu, Xiaogeng & Tucker, Steven, 2018. "Ambiguity attitudes in the loss domain: Decisions for self versus others," Economics Letters, Elsevier, vol. 170(C), pages 100-103.
    13. Kristoffer W. Eriksen & Ola Kvaløy & Miguel Luzuriaga, 2017. "Risk-taking on Behalf of Others," CESifo Working Paper Series 6378, CESifo Group Munich.
    14. repec:eee:ecolet:v:161:y:2017:i:c:p:154-156 is not listed on IDEAS
    15. Julius Pahlke & Sebastian Strasser & Ferdinand Vieider, 2015. "Responsibility effects in decision making under risk," Journal of Risk and Uncertainty, Springer, vol. 51(2), pages 125-146, October.

    More about this item

    Keywords

    risk preferences; responsibility; social preferences;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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