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Deciding for Others Reduces Loss Aversion

Andersson, Ola LU ; Holm, Jerker LU ; Tyran, Jean-Robert and Wengström, Erik LU (2016) In Management Science 62(1). p.29-36
Abstract
We study risk taking on behalf of others, both when choices involve losses and when they do not. A large-scale incentivized experiment with subjects randomly drawn from the Danish population is conducted. We find that deciding for others reduces loss aversion. When choosing between risky prospects for which losses are ruled out by design, subjects make the same choices for themselves as for others. In contrast, when losses are possible, we find that the two types of choices differ. In particular, we find that subjects who make choices for themselves take less risk than those who decide for others when losses loom. This finding is consistent with an interpretation of loss aversion as a bias in decision making driven by emotions and that... (More)
We study risk taking on behalf of others, both when choices involve losses and when they do not. A large-scale incentivized experiment with subjects randomly drawn from the Danish population is conducted. We find that deciding for others reduces loss aversion. When choosing between risky prospects for which losses are ruled out by design, subjects make the same choices for themselves as for others. In contrast, when losses are possible, we find that the two types of choices differ. In particular, we find that subjects who make choices for themselves take less risk than those who decide for others when losses loom. This finding is consistent with an interpretation of loss aversion as a bias in decision making driven by emotions and that these emotions are reduced when making decisions for others. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
risk taking, loss aversion , experiment
in
Management Science
volume
62
issue
1
pages
8 pages
publisher
Informs
external identifiers
  • wos:000372114300002
  • scopus:84961350837
ISSN
0025-1909
DOI
10.1287/mnsc.2014.2085
language
English
LU publication?
yes
id
9a65b0f0-cc05-47b8-9ee9-d3b34f84f0cc (old id 4617181)
date added to LUP
2014-09-09 08:58:52
date last changed
2017-11-12 03:17:12
@article{9a65b0f0-cc05-47b8-9ee9-d3b34f84f0cc,
  abstract     = {We study risk taking on behalf of others, both when choices involve losses and when they do not. A large-scale incentivized experiment with subjects randomly drawn from the Danish population is conducted. We find that deciding for others reduces loss aversion. When choosing between risky prospects for which losses are ruled out by design, subjects make the same choices for themselves as for others. In contrast, when losses are possible, we find that the two types of choices differ. In particular, we find that subjects who make choices for themselves take less risk than those who decide for others when losses loom. This finding is consistent with an interpretation of loss aversion as a bias in decision making driven by emotions and that these emotions are reduced when making decisions for others.},
  author       = {Andersson, Ola and Holm, Jerker and Tyran, Jean-Robert and Wengström, Erik},
  issn         = {0025-1909},
  keyword      = {risk taking,loss aversion  ,experiment},
  language     = {eng},
  number       = {1},
  pages        = {29--36},
  publisher    = {Informs},
  series       = {Management Science},
  title        = {Deciding for Others Reduces Loss Aversion},
  url          = {http://dx.doi.org/10.1287/mnsc.2014.2085},
  volume       = {62},
  year         = {2016},
}