RIEB Discussion Paper Series No.2020-23

Title

Risks on Others

Abstract

We investigate other regarding preferences when others are involved in some risks. We call such risks "risks on others (ROO)." We design a novel experiment to capture ROO, and also theoretically define risk attitudes toward others under two dimensions: an absolute term, which characterizes one's risk attitudes toward others without comparing with other individuals, and a relative term, which compares these risk attitudes between individuals. From our experiment, we find that decision makers exhibit robust risk-averse behaviors, which contradicts the most representative linear inequality aversion models by Fehr and Schmidt (1999). Utilizing our experimental setting, which enables us to compare risk attitudes toward others between subjects, we also investigate the effect of sources of ROO on other regarding behaviors.

Keywords

Other-regarding preferences; Risk preferences; Inequality aversion

JEL Classification

C91, D63, D64, D81, D91

Inquiries

Takaaki HAMADA
Faculty of Economics, Toyo University
Junior Research Fellow, Research Institute for Economics & Business Administration, Kobe University

Tomohiro HARA
Department of Economics, University of Maryland at College Park