The Effect of Feedback Content and Timing on Self-Other Gap in Risk-Taking

Abstract

Previous experiments on delegated decision making find seemingly contradictory results: some experiments find that people take greater risks when they decide for others than for themselves, while other experiments find the opposite. My experiment reconciles the mixed results by showing that the self-other gap in risk taking behavior depends on the content and the timing of feedback. In a choice between two binary lotteries, subjects either learn the outcome of only the chosen lottery or the outcome for both the chosen and the unchosen lottery. Feedback is provided immediately after each decision or after a sequence of ten decisions. When subjects receive an immediate feedback on the outcome of both the chosen and the unchosen options, they make a risky shift. That is, subjects take greater risks for others than for themselves. If I alter either the timing or the content of feedback, the risky shift disappears. If I alter both the timing and the content of feedback so that the feedback is given at the end, only on the outcome of the chosen option, a risky shift is found again.I present a theoretical model and analyze how subjects? risk taking behavior evolves as they make more decisions.