Abstract
In everyday life, people often make decisions on behalf of others. The current study investigates whether risk preferences of decision-makers differ when the reference point is no longer their own money but somebody else money. Thirty four healthy participants performed three different monetary risky choices tasks by making decisions for oneself and for another unknown person. Results showed that loss aversion bias was significantly reduced when participants were choosing on behalf of another person compared to when choosing for themselves. The influence of emotions like regret on decision-making may explain these results. We discuss the importance of the sense of responsibility embodied in the emotion of regret in modulating economic decisions for self but not for others. Moreover, our findings are consistent with the Risk-as-feelings hypothesis, suggesting that self-other asymmetrical behavior is due to the extent the decision-maker is affected by the real and emotional consequences of his/her decision.
Highlights
In a famous scene of the movie Wall Street: Money Never Sleeps (2010), Michael Douglas, interpreting the financial trader Gordon Gekko, defines moral hazard as ‘‘when somebody takes your money and he is not responsible for it’’
In the current study three different financial decisions tasks were used to investigate the hypothesis that making economic choices for oneself and for another person involves distinct processes
We showed that when deciding on others’ behalf, participants become more risk-seeking as compared to when deciding for themselves. This finding corroborates the hypothesis suggesting that economic decisions are perceived less riskier and loss aversion is minimized when economic consequences involve other people [12,14,15]
Summary
In a famous scene of the movie Wall Street: Money Never Sleeps (2010), Michael Douglas, interpreting the financial trader Gordon Gekko, defines moral hazard as ‘‘when somebody takes your money and he is not responsible for it’’. Principalagent models have addressed this issue in the attempt to describe how risk taking is shared among parties in conditions where the principal engages the agent to take decisions in his/her own interest [6,7]. This type of situations is quite common in the context of the western financial system where traders as Gordon Gekko represent a good example of decision-making on behalf of someone else. In other words, when we hand over our money to financial advisors, will they handle it as carefully as if it was their own money? Are individuals loss-averse when the money they make choice with is not their own money? It has been argued that people would assign a higher value on a good that they own compared to an identical good that they do not own [8], suggesting that loss of others’ money would not trigger an equal amount of emotional arousal as loss of own money does
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
