Motives for Delegating Financial Decisions

Why do some investors delegate financial decisions to supposed experts? We report an on-line experiment designed to disentangle four possible motives. About 800 investors drawn from the Prolific subject pool choose whether or not to delegate a real-stakes choice among lotteries to a previous investor (a “designee”) after seeing information on the performance of several available designees. We find that a surprisingly large fraction of investors delegate even trivial choice tasks, suggesting a major role for blame shifting motives. 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 designee 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.