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

TY - JOUR

T1 - Risking Other People's Money

T2 - Experimental Evidence on the Role of Incentives and Personality Traits

AU - Andersson, Ola

AU - Holm, Hj

AU - Tyran, Jean-Robert

AU - Wengström, Erik

PY - 2020/4

Y1 - 2020/4

N2 - Decision makers often face incentives to increase risk‐taking on behalf of others through bonus contracts and relative performance contracts. We conduct an experimental study of risk‐taking on behalf of others using a large heterogeneous sample and 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 lack of concern for others’ risk exposure hardly requires “financial psychopaths” in order to flourish, but is diminished by social concerns.

AB - Decision makers often face incentives to increase risk‐taking on behalf of others through bonus contracts and relative performance contracts. We conduct an experimental study of risk‐taking on behalf of others using a large heterogeneous sample and 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 lack of concern for others’ risk exposure hardly requires “financial psychopaths” in order to flourish, but is diminished by social concerns.

KW - Competition

KW - hedging

KW - incentives

KW - risk-taking

KW - social preferences

U2 - 10.1111/sjoe.12353

DO - 10.1111/sjoe.12353

M3 - Article

AN - SCOPUS:85070290927

VL - 122

SP - 648

EP - 674

JO - Scandinavian Journal of Economics

JF - Scandinavian Journal of Economics

SN - 1467-9442

IS - 2

ER -