Am I My Peer's Keeper? Social Responsibility in Financial Decision Making

Abstract

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

“…Our paper contributes to a sparse but growing body of experimental literature on risky decision‐making on behalf of others. In contrast to what we study here, the bulk of this literature concerns situations where there are no strong monetary conflicts of interest between decision‐makers and receivers (e.g., Brennan et al ., ; Güth et al ., ; Sutter, ; Bolton and Ockenfels, ; Eriksen and Kval⊘y, ; Chakravarty et al ., ; Eriksen et al ., 2015; Füllbrunn and Luhan, ). The results in this literature are somewhat mixed and, as a result of significant design and sample differences, they are difficult to compare with each other and with the current study; see Andersson et al .…”

Behavioral economic phenomena in decision-making for others

“…These (and other DMfO) studies vary widely in their methodologies, with some using only hypothetical questions, some framing DMfO as advice, some framing DMfO as predictions of others' behavior, some providing financial incentives for decision-makers, some involving decisions for or by groups, etc. In the risk literature, the reported self-other discrepancies are similarly varied: some find lower risk-aversion in DMfO (Agranov et al, 2014;Chakravarty et al, 2011;Lee, 2018;Polman, 2012;and Pollmann et al, 2014), and some higher (Bolton & Ockenfels, 2010;Charness & Jackson, 2009;Eriksen & Kvaløy, 2010;Eriksen et al, 2017;Füllbrunn & Luhan, 2015;Pahlke et al, 2015;and Reynolds et al, 2009). Perhaps unsurprisingly, given such mixed results, Ericksen et al (2017) find increased variance in DMfO risk aversion.…”

“… Completed an informed-consent form and read general instructions 1 Self-other discrepancies are identified using modified DMfO environments in the following papers: in Charness & Jackson (2009), Pahlke et al (2012), & Pahlke et al (2015), subjects made decisions on behalf of a group of two, of which they were members; in Füllbrunn & Luhan (2015) & Reynolds et al (2009, subjects made decisions on behalf of a group (4-6 members), of which they were not members; in Eriksen & Kvaloy (2010), there was no DMfO at all, rather decisions made on behalf of themselves of professional financial advisors (who often engage in DMfO as part of their work) were compared to those of students; in Kogut & Beyth-Marom (2008), subjects reported how much they would expect the "average student" to donate in hypothetical scenarios.…”

Do We Become More Cautious for Others When Large Amounts of Money Are at Stake?

“…) and are particularly common in the financial sector. One of the reasons why understanding financial surrogate decisions is so important is their implication in the financial crisis of 2007-2008. It is generally accepted that excessive risk-taking by people acting on behalf of investors was a causal factor in the crisis Eriksen, Kvaløy, & Luzuriaga, 2017;Füllbrunn & Luhan, 2015). This might not have happened if investors were managing their own money.…”

“…It has been conjectured that being responsible for somebody else's welfare pushes decision-makers to be more cautious than when deciding for themselves (Charness & Jackson, 2009). Responsibility is expected to increase with the significance of the decision, which means that decision-makers should reduce their risk-taking for others as the significance increasesthe cautious shift account (Eriksen & Kvaløy, 2010;Füllbrunn & Luhan, 2015;Reynolds, 2009). Indeed, there is evidence that risk-taking for others is reduced when the decision-maker feels responsible or is held accountable (Montinari & Rancan, 2013;Pahlke, Strasser, & Vieider, 2012;Pollmann, Potters, & Trautmann, 2014).…”