Deciding for Others Reduces Loss Aversion

39 Pages Posted: 30 Oct 2013

See all articles by Ola Andersson

Ola Andersson

Research Institute of Industrial Economics (IFN); Uppsala University - Department of Economics

Håkan J. Holm

Lund University - Department of Economics

Jean-Robert Tyran

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

Erik Wengström

University of Copenhagen - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 2013

Abstract

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.

Keywords: risk taking, loss aversion, experiment

JEL Classification: C91, D03, D81, G02

Suggested Citation

Andersson, Ola and Andersson, Ola and Holm, Hakan J. and Tyran, Jean-Robert and Wengström, Erik, Deciding for Others Reduces Loss Aversion (September 2013). Available at SSRN: https://ssrn.com/abstract=2347332 or http://dx.doi.org/10.2139/ssrn.2347332

Ola Andersson (Contact Author)

Uppsala University - Department of Economics ( email )

Box 513
Uppsala, 751 20
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
+46 (0)8-665 45 21 (Phone)
+46 8-665 45 99 (Fax)

HOME PAGE: http://www.ifn.se/medarbetare/forskare/ola-andersson

Hakan J. Holm

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07 Lund
Sweden

Jean-Robert Tyran

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, Vienna 1090
Austria

HOME PAGE: http://homepage.univie.ac.at/jean-robert.tyran/

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark
+45 353 23 027 (Phone)

HOME PAGE: http://www.econ.ku.dk/tyran/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Erik Wengström

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

HOME PAGE: http://www.econ.ku.dk/wengstrom

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