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

Ola Andersson, Hakan Holm, Jean-Robert Tyran, Erik Wengström

Publications: Contribution to journalArticlePeer Reviewed

Abstract

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.

Original languageEnglish
Pages (from-to)648-674
Number of pages27
JournalScandinavian Journal of Economics
Volume122
Issue number2
Early online date18 Mar 2019
DOIs
Publication statusPublished - Apr 2020

Austrian Fields of Science 2012

  • 502045 Behavioural economics

Keywords

  • Experimental economics
  • Finance investment banking
  • Competition
  • risk-taking
  • BEHAVIOR
  • TIME
  • ATTITUDES
  • hedging
  • IMPACT
  • incentives
  • social preferences
  • FINANCE
  • COMPETITION
  • PREFERENCES
  • AVERSION
  • GENDER-DIFFERENCES

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