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Economic Decisions for Others: An Exception to Loss Aversion Law

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  • Flavia Mengarelli
  • Laura Moretti
  • Valeria Faralla
  • Philippe Vindras
  • Angela Sirigu

Abstract

In everyday life, people often make decisions on behalf of others. The current study investigates whether risk preferences of decision-makers differ when the reference point is no longer their own money but somebody else money. Thirty four healthy participants performed three different monetary risky choices tasks by making decisions for oneself and for another unknown person. Results showed that loss aversion bias was significantly reduced when participants were choosing on behalf of another person compared to when choosing for themselves. The influence of emotions like regret on decision-making may explain these results. We discuss the importance of the sense of responsibility embodied in the emotion of regret in modulating economic decisions for self but not for others. Moreover, our findings are consistent with the Risk-as-feelings hypothesis, suggesting that self-other asymmetrical behavior is due to the extent the decision-maker is affected by the real and emotional consequences of his/her decision.

Suggested Citation

  • Flavia Mengarelli & Laura Moretti & Valeria Faralla & Philippe Vindras & Angela Sirigu, 2014. "Economic Decisions for Others: An Exception to Loss Aversion Law," PLOS ONE, Public Library of Science, vol. 9(1), pages 1-6, January.
  • Handle: RePEc:plo:pone00:0085042
    DOI: 10.1371/journal.pone.0085042
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    References listed on IDEAS

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    Cited by:

    1. Ertac, Seda & Gumren, Mert & Gurdal, Mehmet Y., 2020. "Demand for decision autonomy and the desire to avoid responsibility in risky environments: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 77(C).
    2. Barrafrem, Kinga & Hausfeld, Jan, 2020. "Tracing risky decisions for oneself and others: The role of intuition and deliberation," Journal of Economic Psychology, Elsevier, vol. 77(C).
    3. Losecaat Vermeer, Annabel B. & Boksem, Maarten A.S. & Sanfey, Alan G., 2020. "Third-party decision-making under risk as a function of prior gains and losses," Journal of Economic Psychology, Elsevier, vol. 77(C).
    4. Ricardo Lopes Cardoso & Rodrigo Oliveira Leite & André Carlos Busanelli de Aquino, 2016. "A Graph is Worth a Thousand Words: How Overconfidence and Graphical Disclosure of Numerical Information Influence Financial Analysts Accuracy on Decision Making," PLOS ONE, Public Library of Science, vol. 11(8), pages 1-14, August.
    5. Lazar, Maya & Levkowitz, Amir & Oren, Amit & Sonsino, Doron, 2017. "A note on receptiveness to loss in structured Investment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 69(C), pages 92-98.
    6. Niall Flynn & Christopher Kah & Rudolf Kerschbamer, 2016. "Vickrey auction vs BDM: difference in bidding behaviour and the impact of other-regarding motives," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 2(2), pages 101-108, November.
    7. Polman, Evan & Wu, Kaiyang, 2020. "Decision making for others involving risk: A review and meta-analysis," Journal of Economic Psychology, Elsevier, vol. 77(C).
    8. Eleonore Batteux & Eamonn Ferguson & Richard J Tunney, 2019. "Do our risk preferences change when we make decisions for others? A meta-analysis of self-other differences in decisions involving risk," PLOS ONE, Public Library of Science, vol. 14(5), pages 1-19, May.
    9. Biroli, Pietro & Bosworth, Steven J. & Della Giusta, Marina & Di Girolamo, Amalia & Jaworska, Sylvia & Vollen, Jeremy, 2020. "Framing the Predicted Impacts of COVID-19 Prophylactic Measures in Terms of Lives Saved Rather Than Deaths Is More Effective for Older People," IZA Discussion Papers 13753, Institute of Labor Economics (IZA).

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