Social Comparison and Risk Taking Behavior

47 Pages Posted: 28 Jan 2014

See all articles by Astrid Gamba

Astrid Gamba

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Elena Manzoni

University of Verona - Department of Economics

Date Written: January 27, 2014

Abstract

We study theoretically and experimentally decision making under uncertainty in a social environment. We introduce an interdependent preferences model that assumes that the decision maker evaluates monetary outcomes in relation both with his individual and his social reference point. In the experiment we reproduce a workplace environment whereby subjects interact in an effort task, earn (possibly) different wages from this task and then undertake a risky decision that may give them an extra bonus. Controlling for intrinsic risk attitudes, we find that both downward and upward social comparison strongly influence risk attitudes and that they both generate more risk-loving behavior. Moreover, we find that a propension to envy counterposes such effect, by increasing risk aversion.

Keywords: social comparison, risk aversion, interdependent preferences, reference point

JEL Classification: C91, D03, D81

Suggested Citation

Gamba, Astrid and Manzoni, Elena, Social Comparison and Risk Taking Behavior (January 27, 2014). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 266, Available at SSRN: https://ssrn.com/abstract=2385942 or http://dx.doi.org/10.2139/ssrn.2385942

Astrid Gamba (Contact Author)

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Elena Manzoni

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
37129 Verona
Italy

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