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arxiv 2309.03419 v3 pith:757FLMLG submitted 2023-09-07 econ.GN q-fin.EC

Motives for Delegating Financial Decisions

classification econ.GN q-fin.EC
keywords investorsdelegaterolesomesuggestingchoicechoosedecisions
verification ladder T0 review T1 audit T2 compute T3 formal T4 reserved
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Why do some investors delegate financial decisions to supposed experts? We report a laboratory experiment designed to disentangle four possible motives. Almost 600 investors drawn from the Prolific subject pool choose whether or not to delegate a real-stakes choice among lotteries to a previous investor (an ``expert'') after seeing information on the performance of several available experts. We find that a surprisingly large fraction of investors delegate even trivial choice tasks, suggesting a major role for the blame shifting motive. A larger fraction of investors delegate our more complex tasks, suggesting that decision costs play a role for some investors. Some investors who delegate choose a low quality expert with high earnings, suggesting a role for chasing past performance. We find no evidence for a fourth possible motive, that delegation makes risk more acceptable.

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