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University of Stavanger UiS Working Papers in Economics and Finance

No 2014/21:
Risk-taking with Other Peopleís Money

Ola KvalÝy (), Kristoffer Eriksen () and Miguel Luzuriaga ()

Abstract: We present an experimental study on how people take risk with other peopleís money. We use three different elicitation methods, and study how each subject makes decisions both on behalf of own money and on behalf of another individualís money. We find that a majority of subjects make different decisions on behalf of others than on behalf of themselves. Approximately one third of the subjects increase risk-taking when it is on behalf of another subject, while one third reduces risk-taking. In sum, we find a weak tendency of lower risk-taking with otherís money compared with own money. We also find that subjects on average think that others are more risk averse than themselves. Moreover, subjects believe that other participants take less risk with their own money than with other peopleís money.

Keywords: Risk-taking; Experiment; Social preferences; (follow links to similar papers)

JEL-Codes: C91; G11; (follow links to similar papers)

24 pages, November 20, 2014

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