Working Paper No. 989

Risking Other People’s Money: Experimental Evidence on Bonus Schemes, Competition, and Altruism

Published: November 19, 2013Pages: 49Keywords: Incentives; Competition; Hedging; Risk taking; Social preferencesJEL-codes: C72; C90; D30; D81

Risking Other People’s Money: Experimental Evidence on Bonus Schemes, Competition, and Altruism Ola Andersson, Håkan J. Holm, Jean-Robert Tyran and Erik Wengström


We study risk taking on behalf of others in an experiment on a large random sample. The decision makers in our experiment are facing high-powered incentives to increase the risk on behalf of others through hedged compensation contracts or with tournament incentives. Compared to a baseline condition without such incentives, we find that the decision makers respond strongly to these incentives that result in an increased risk exposure of others. However, we find that the increase in risk taking is mitigated by altruistic preferences and pro-social personality traits.

 

Ola Andersson

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ola.andersson@ifn.se

Elgar Companion to

Social Capital and Health

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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