Risking Other Peoples Money
52 Pages Posted: 19 Nov 2013
Date Written: November 2013
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.
Keywords: Competition, Hedging, Incentives, Risk Taking, Social Preferences
JEL Classification: C72, C90, D30, D81
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