Risking Other People's Money: Experimental Evidence on Bonus Schemes, Competition, and Altruism

Posted: 17 Jul 2014

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

Date Written: November 16, 2013

Abstract

We study risk taking on behalf of others in an experiment on a large random sample. The decision makers in our experiment are facing high-powered incentives to increase the risk on behalf of others through hedged compensation contracts or with tournament incentives. Compared to a baseline condition without such incentives, we find that the decision makers respond strongly to these incentives that result in an increased risk exposure of others. However, we find that the increase in risk taking is mitigated by altruistic preferences and pro-social personality traits.

Keywords: Incentives, competition, hedging, risk taking, social preferences

JEL Classification: C72, C90, D30, D81

Suggested Citation

Andersson, Ola and Holm, Hakan J. and Tyran, Jean-Robert and Wengström, Erik, Risking Other People's Money: Experimental Evidence on Bonus Schemes, Competition, and Altruism (November 16, 2013). IFN Working Paper No. 989, Available at SSRN: https://ssrn.com/abstract=2466988

Ola Andersson (Contact Author)

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

Uppsala University - Department of Economics ( email )

Box 513
Uppsala, 751 20
Sweden

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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