I will risk a stranger’s money, but not my own or my friend’s money: Effect of proximity of the money source to the self on financial risk-taking

This research examines the effect of perceived closeness to a source of money on people’s likelihood to take financial risks. Across two experiments using gambling decision scenarios, we find that people make riskier choices when the monetary cost of the decision is high (vs. low) and when they perceive the source of the money as distant from (vs. close to) the self. Study 1 demonstrates that people make riskier decisions when someone else is paying than when they are paying, but only when the monetary cost of the gamble is relatively high (vs. low). Study 2 demonstrates that people make riskier decisions with a distant (vs. close) other’s money, presumably because they perceive a close (distant) other’s resources as similar to (different from) their own resources. The findings support the notion that the source of money affects how people mentally account for it, with proximity to the self as a determining factor.