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Deciding for others reduces loss aversion

Ola Andersson, Hakan Holm (), Jean-Robert Tyran () and Erik Wengström ()

No 2014/4, Knut Wicksell Working Paper Series from Lund University, Knut Wicksell Centre for Financial Studies

Abstract: We study risk taking on behalf of others, both when choices involve losses and when they do not. We conduct a large-scale incentivized experiment 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 is substantial and is due to a decrease in loss aversion when others are affected by their choices. This finding is consistent with the account of the dual process model, i.e. an interpretation of loss aversion as a bias in decision making.

Keywords: Risk taking; loss aversion; experiment (search for similar items in EconPapers)
JEL-codes: C91 D03 D81 G02 (search for similar items in EconPapers)
Date: 2014-09-15
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Related works:
Journal Article: Deciding for Others Reduces Loss Aversion (2016) Downloads
Working Paper: Deciding for Others Reduces Loss Aversion (2013) Downloads
Working Paper: Deciding for Others Reduces Loss Aversion (2013) Downloads
Working Paper: Deciding for Others Reduces Loss Aversion (2013) Downloads
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