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Risking Other People?s Money

Author

Listed:
  • Tyran, Jean-Robert
  • Andersson, Ola
  • Holm, HÃ¥kan J.
  • Wengström, Erik

Abstract

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.

Suggested Citation

  • Tyran, Jean-Robert & Andersson, Ola & Holm, HÃ¥kan J. & Wengström, Erik, 2013. "Risking Other People?s Money," CEPR Discussion Papers 9743, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9743
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    References listed on IDEAS

    as
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    3. Bryan, David B. & Mason, Terry W., 2017. "Executive tournament incentives and audit fees," Advances in accounting, Elsevier, vol. 37(C), pages 30-45.
    4. Biener, Christian & Eling, Martin & Landmann, Andreas & Pradhan, Shailee, 2018. "Can group incentives alleviate moral hazard? The role of pro-social preferences," European Economic Review, Elsevier, vol. 101(C), pages 230-249.
    5. de Oliveira, Angela C.M. & Smith, Alexander & Spraggon, John, 2017. "Reward the lucky? An experimental investigation of the impact of agency and luck on bonuses," Journal of Economic Psychology, Elsevier, vol. 62(C), pages 87-97.
    6. Harris, Qun & Mercieca, Analise & Soane, Emma & Tanaka, Misa, 2018. "How do bonus cap and malus affect risk and effort choice Insight from a lab experiment," Bank of England working papers 736, Bank of England.

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    More about this item

    Keywords

    Competition; Hedging; Incentives; Risk taking; Social preferences;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D30 - Microeconomics - - Distribution - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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