Deciding for Others Reduces Loss Aversion

Reprint No. 2016:3

Author(s): Ola Andersson, Håkan J. Holm, Jean-Robert Tyran and Erik WengströmYear: 2016 Title: Management Science Volume (No.): 62 (1) Pages: 29–36
Online article (restrictions may apply)
Preliminary version

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.

Andersson, Ola, Håkan J. Holm, Jean-Robert Tyran and Erik Wengström (2016), "Deciding for Others Reduces Loss Aversion". Management Science 62(1), 29–36.

Ola Andersson


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