I Choose For You: an Experimental Study

TL;DR

This study examines how risk and time preferences change when individuals decide for others versus themselves, using a novel experimental design that incorporates direct costs to reveal genuine trade-offs.

Contribution

Introduces a new 'skin in the game' experimental method that captures heterogeneity and improves behavioral prediction in decision-making for others.

Findings

Participants are more risk-averse and impatient when deciding for others.

The methodology identifies selfish types often missed by standard approaches.

Behavioral consistency and predictive power are improved with the new framework.

Abstract

We investigate whether risk and time preferences differ when individuals make decisions for others compared to making decisions for themselves. We introduce a novel ``skin in the game'' experimental design, where choices for others incur a direct cost to the decision-maker, ensuring a genuine trade-off between self-interest and surrogate allocation. The modal outcome is that participants are more risk-averse and impatient when choosing for others than for themselves. Our methodology reveals significant heterogeneity, successfully identifying selfish types often missed by the more standard ``no skin in the game'' approaches. The message is nuanced, as even non-selfish participants behave differently when they have skin in the game. Furthermore, our framework yields more consistent behavior and superior out-of-sample predictive power.