Abstract
A considerable proportion of financial decisions are made by agents acting on behalf of other people. Although people are more cautious for others when making medical decisions, this does not seem to be the case for economic decisions. However, studies with large amounts of money are particularly absent from the literature, which precludes a clear comparison to studies in the medical domain. To address this gap, we investigated the effect of outcome magnitude in two experiments where participants made choices between safe and risky options. Decision-makers were not more cautious for others over large amounts. In fact, risk-taking was accentuated for large amounts in the gain domain. We did not find self-other differences in the loss domain for either outcome magnitude. This suggests that the caution observed in medical decisions does not replicate in financial decisions with large amounts, or at least not in the same way. These results echo the concerns that have been raised about excessive risk-taking by financial agents.
Highlights
A considerable proportion of financial decisions are made by agents acting on behalf of other people
We do not find that selfother differences vary by outcome magnitude, which suggests that decisions for others over large magnitudes are not comparable in the economic and medical domains
Participants were more riskseeking for others in the large magnitude condition (t138=-2.96, p=.004, d=0.25) but not the small magnitude condition (t138=0.60, p=.555, d=0.05)
Summary
A considerable proportion of financial decisions are made by agents acting on behalf of other people. Studies with large amounts of money are absent from the literature, which precludes a clear comparison to studies in the medical domain To address this gap, we investigated the effect of outcome magnitude in two experiments where participants made choices between safe and risky options. We did not find self-other differences in the loss domain for either outcome magnitude This suggests that the caution observed in medical decisions does not replicate in financial decisions with large amounts, or at least not in the same way. These results echo the concerns that have been raised about excessive risk-taking by financial agents.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.