Social Comparison and Risk Taking Behavior
47 Pages Posted: 28 Jan 2014
Date Written: January 27, 2014
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, wefind that both downward and upward social comparison strongly influence risk attitudes and that they both generate more risk-loving behavior. Moreover, wefind 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
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