Even if the standard economic model of individual decision making does not assume that decision makers take into account how their decisions affect others, recent developments in economic research suggest that decision makers are internalizing this.
This suggests that concern about how others are affected mitigates unnecessary social risk-taking. Experience shows, at the same time, that large risks are taken on the behalf of others (see e.g. the recent financial crisis). The research on the issue of social risk-taking is underdeveloped, yet recent developments in economic theory and experimental methods are well suited to study this phenomenon. Two major sub-projects are planned.
- Risk-taking and the role of market strategy of entrepreneurs. The purpose of this project is to study the entrepreneur’s attitude towards risk and competition.
- Representative risk-taking. In this project, we intend to study how different degrees of competition affect the level of risk-taking when an agent’s action affects the degree of risk that the investor is exposed to.