Scandinavian Working Papers in Economics

UiS Working Papers in Economics and Finance,
University of Stavanger

No 2014/21: Risk-taking with Other People’s Money

Ola Kvaløy (), Kristoffer Eriksen () and Miguel Luzuriaga ()
Additional contact information
Ola Kvaløy: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway
Kristoffer Eriksen: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway
Miguel Luzuriaga: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway

Abstract: We present an experimental study on how people take risk with other people’s 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 individual’s 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 other’s 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 people’s money.

Keywords: Risk-taking; Experiment; Social preferences

JEL-codes: C91; G11

24 pages, November 20, 2014

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