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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2013:30:
Deciding for Others Reduces Loss Aversion

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

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; (follow links to similar papers)

JEL-Codes: C91; D03; D81; G02; (follow links to similar papers)

39 pages, September 11, 2013

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