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Risk taking for oneself and others: a structural model approach

Vieider, F. M., Villegas-Palacio, C., Martinsson, P. and Majia, M. (2016) Risk taking for oneself and others: a structural model approach. Economic Inquiry, 54 (2). pp. 879-894. ISSN 1465-7295

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To link to this item DOI: 10.1111/ecin.12290

Abstract/Summary

Economic theory makes no predictions about social factors affecting decisions under risk. We examine situations in which a decision maker decides for herself and another person under conditions of payoff equality, and compare them to individual decisions. By estimating a structural model, we find that responsibility leaves utility curvature unaffected, but accentuates the subjective distortion of very small and very large probabilities for both gains and losses. We also find that responsibility reduces loss aversion, but that these results only obtain under some specific definitions of the latter. These results serve to generalize and reconcile some of the still largely contradictory findings in the literature. They also have implications for financial agency, which we discuss.

Item Type:Article
Refereed:Yes
Divisions:Faculty of Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
ID Code:46537
Publisher:Wiley

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