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I Choose For You: an Experimental Study

Marina Agranov, Federico Echenique, Kota Saito

TL;DR

The paper investigates whether risk and time preferences differ when decisions are made for Others versus for Me, introducing a skin-in-the-game (SIG) design that makes surrogate decisions costly to the decider. Using MPLs to elicit three indifference points per domain, the authors compare SIG against a traditional no-SIG approach, revealing substantial heterogeneity and a modal pattern of greater risk aversion and impatience when choosing for Others. Structural estimation under CRRA and exponential discounting confirms Me as more risk-averse and less patient with Others than with themselves, and SIG outperforms no-SIG in out-of-sample predictive power. The work shows that standard no-SIG designs can misrepresent self-other preferences, with important implications for delegation, financial advising, and policy where decisions affect others.

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.

I Choose For You: an Experimental Study

TL;DR

The paper investigates whether risk and time preferences differ when decisions are made for Others versus for Me, introducing a skin-in-the-game (SIG) design that makes surrogate decisions costly to the decider. Using MPLs to elicit three indifference points per domain, the authors compare SIG against a traditional no-SIG approach, revealing substantial heterogeneity and a modal pattern of greater risk aversion and impatience when choosing for Others. Structural estimation under CRRA and exponential discounting confirms Me as more risk-averse and less patient with Others than with themselves, and SIG outperforms no-SIG in out-of-sample predictive power. The work shows that standard no-SIG designs can misrepresent self-other preferences, with important implications for delegation, financial advising, and policy where decisions affect others.

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.
Paper Structure (29 sections, 1 theorem, 2 equations, 20 figures, 8 tables)

This paper contains 29 sections, 1 theorem, 2 equations, 20 figures, 8 tables.

Table of Contents

  1. Introduction
  2. Related literature
  3. Model
  4. No Skin In The Game Method
  5. Skin In The Game Method
  6. Experimental Design
  7. Ordinal Comparison of Preferences: Identification
  8. Experimental Protocol
  9. Valuation tasks.
  10. Parameters.
  11. Structure of the Experiment.
  12. Control tasks.
  13. Incentives.
  14. Sample and Recruitment.
  15. Ethics and Pre-registration.
  16. ...and 14 more sections

Key Result

Proposition 1

$\theta\succeq^* \theta'$ if and only if $x^*(\theta,q)\leq x^*(\theta',q)$.

Figures (20)

  • Figure 1: Two types of multiple-price lists
  • Figure 2: Connection between preferences, ordinal skin-in-the-game approach
  • Figure 3: Individual Structural Estimates of Risk and Time Parameters
  • Figure B.1: Risk and time preferences for Me
  • Figure :
  • ...and 15 more figures

Theorems & Definitions (3)

  • Example 1
  • Proposition 1
  • proof