Working Paper: CEPR ID: DP9743
Authors: Ola Andersson; Hkan J. Holm; Jean-Robert Tyran; Erik Wengström
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 Codes: C72; C90; D30; D81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High-powered incentives (bonus and competition) (M52) | Increased risk taken on behalf of others (D81) |
| Altruistic preferences and prosocial personality traits (D64) | Mitigation of risk-taking (D81) |
| Lower scores in measures of altruism and prosociality (D64) | Increased risk exposure to others (D81) |