Template-type: ReDif-Paper 1.0
Author-Name: Cettolin, Elena
Author-Name: Tausch, Franziska
Title: Risk taking and risk sharing: does responsibility matter? (RM/13/045-revised-)
Abstract: Risk sharing arrangements diminish individuals’ vulnerability to probabilistic events that negatively affect their financial situation. This is because risk sharing implies redistribution, as lucky individuals support the unlucky ones. We hypothesize that responsibility for risky choices decreases individuals’ willingness to share risk by dampening redistribution motives, and <br/>investigate this conjecture with a laboratory experiment. Responsibility is created by allowing participants to choose between two different risky lotteries before they decide how much risk they share with a randomly matched partner. Risk sharing is then compared to a treatment where risk exposure is randomly assigned. We find that average risk sharing does not depend on whether <br/>individuals can control their risk exposure. However, we observe that  when individuals  are responsible  for their  risk exposure, risk sharing decisions  are systematically conditioned on the risk exposure of the sharing partner, whereas this is not the case when risk exposure is random.<br/><br/><br/>
Classification-JEL: d81,c91
Series: GSBE Research Memoranda
Creation-Date: 20160101
Number: 018
File-URL: https://cris.maastrichtuniversity.nl/ws/files/2237173/RM16018.pdf
File-Format: application/pdf
File-Size: 585073
Handle: Repec:unm:umagsb:2016018
DOI: 10.26481/umagsb.2016018