Risking Other People's Money: Experimental Evidence on the Role of Incentives and Personality Traits |
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Authors: | Ola Andersson Håkan J Holm Jean-Robert Tyran Erik Wengström |
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Institution: | 1. Uppsala University, SE-751 20 Uppsala, Sweden;2. Lund University, SE-220 07 Lund, Sweden;3. University of Vienna, A-1090 Vienna, Austria |
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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. |
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Keywords: | Competition hedging incentives risk-taking social preferences |
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