Keep Up with the Winners: Experimental Evidence on Risk Taking, Asset Integration, and Peer Effects
52 Pages Posted: 8 Nov 2013
There are 2 versions of this paper
Keep Up with the Winners: Experimental Evidence on Risk Taking, Asset Integration, and Peer Effects
Date Written: November 2013
Abstract
The paper reports the result of an experimental game on asset integration and risk taking. We find evidence that winnings in earlier rounds affect risk taking in subsequent rounds, but no evidence that real life wealth outside the experiment affects risk taking. We find some evidence of imitation of the risk taking behavior of others that is distinct from learning. Controlling for past winnings, participants who receive a low endowment in a round engage in more risk taking. We also test a 'keeping-up-with-the-Joneses' hypothesis and find some evidence that subjects seek to keep up with winners. Taken together, the evidence is consistent with risk taking tracking a reference point that is affected by social comparisons.
Keywords: asset integration, prospect theory, risk, social comparisons
JEL Classification: C91, D12, D81
Suggested Citation: Suggested Citation