Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/98455 
Year of Publication: 
2013
Series/Report no.: 
Jena Economic Research Papers No. 2013-050
Publisher: 
Friedrich Schiller University Jena and Max Planck Institute of Economics, Jena
Abstract: 
In many different contexts individuals take decisions on the behalf of others. However, little is known about how this circumstance affects the decision making process and influences the ultimate individuals´ choices. In this paper, we focus on the context of investment decisions and study if (and how) lottery-type investment decisions made on behalf of another person differ i) compared to decisions which do not affect anyone else, and ii) depending on the social distance between who makes the decision and who is affected by it. Our results shows that social distance (i.e., whether the person affected by one´s decision is an unknown stranger or a friend) is an important determinant when people decide on the behalf of others. Individuals are heterogeneous in their individual investment strategies but, on average, when deciding on behalf of a friend rather than only for themselves or a stranger, their behavior is closer to expected value maximization, exhibiting less risk taking. We interpret these findings as evidence of other regarding preferences affecting the decision making process in lottery-type decisions when the social distance is shortened.
Subjects: 
friends
lottery-type investment
other regarding preferences
risk seeking
social distance
JEL: 
A13
C91
D64
D81
Document Type: 
Working Paper

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