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Research Institute of Industrial Economics (IFN) Working Paper Series

No 989:
Risking Other People’s Money: Experimental Evidence on Bonus Schemes, Competition, and Altruism

Ola Andersson (), Håkan J. Holm (), Jean-Robert Tyran () and Erik Wengström ()

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; (follow links to similar papers)

JEL-Codes: C72; C90; D30; D81; (follow links to similar papers)

49 pages, November 19, 2013

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