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Scandinavian Journal of Economics

Risking Other People's Money: Experimental Evidence on the Role of Incentives and Personality Traits

Journal Article
Reference
Andersson, Ola, Håkan J. Holm, Jean‐Robert Tyran and Erik Wengström (2020). “Risking Other People's Money: Experimental Evidence on the Role of Incentives and Personality Traits”. Scandinavian Journal of Economics 122(2), 648–674. doi.org/10.1111/sjoe.12353

Authors
Ola Andersson, Håkan J. Holm, Jean‐Robert Tyran, Erik Wengström

Decision-makers often face incentives to increase risk-taking on behalf of others (e.g., they are offered bonus contracts and contracts based on relative performance). We conduct an experimental study of risk-taking on behalf of others using a large heterogeneous sample, and we find that people respond to such incentives without much apparent concern for stakeholders. Responses are heterogeneous and mitigated by personality traits. The findings suggest that a lack of concern for others’ risk exposure hardly requires “financial psychopaths” in order to flourish, but it is diminished by social concerns.