Being watched in an investment game setting: Behavioral changes when making risky decisions
Z. Tingting Jia and
Matthew McMahon
Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2020, vol. 88, issue C
Abstract:
We design a laboratory experiment to test for behavioral differences due to observation within a novel arena: investment games. We find that fund managers are more risk-averse when investors can observe their investment allocations. This effect is more pronounced when investors, in addition to observing the allocations, can also observe the investment outcomes. Interestingly, allowing investors to observe how their investment is allocated does not impact how much they invest. Last, when the outcome of the risky investment is public knowledge, disclosing managers’ allocations leads them to return more tokens to investors and to expropriate fewer tokens for themselves at the end of the game, ceteris paribus. We discuss potential causes of these effects.
Keywords: Investment game; Risk; Reciprocity; Trustworthiness; Experiment (search for similar items in EconPapers)
JEL-codes: C71 C91 D81 D82 D9 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:88:y:2020:i:c:s2214804319303714
DOI: 10.1016/j.socec.2020.101593
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