Increased Risk Taking, Not Loss Tolerance, Drives Adolescents’ Propensity to Gamble More Under Peer Observation

54 Pages Posted: 17 Jul 2020

See all articles by Agnieszka Tymula

Agnieszka Tymula

The University of Sydney - School of Economics; New York University (NYU) - Center for Neuroeconomics

Xueting Wang

The University of Sydney

Date Written: April 22, 2020

Abstract

Relative to adults, adolescents make more welfare-decreasing decisions, especially in the presence of peers. The consequences of these decisions result in substantial individual and societal losses in terms of lives lost, injury, hospitalization costs, and foregone opportunities. In this paper, we used a laboratory experiment with 12- to 24-year-old participants to identify which economic preference is affected by peer observation in adolescence — risk attitudes in gains, risk attitudes in losses, and/or loss aversion. We found that older adolescents (18-24 years old) while observed by peers become more risk-tolerant both in gains and in losses but more loss averse. We discuss potential mechanisms driving the result and its implications for policy.

Keywords: decision-making, adolescence, observation, loss aversion, risk attitudes

Suggested Citation

Tymula, Agnieszka and Wang, Xueting, Increased Risk Taking, Not Loss Tolerance, Drives Adolescents’ Propensity to Gamble More Under Peer Observation (April 22, 2020). Life Course Centre Working Paper No. 2020-08, Available at SSRN: https://ssrn.com/abstract=3634358 or http://dx.doi.org/10.2139/ssrn.3634358

Agnieszka Tymula

The University of Sydney - School of Economics ( email )

Rm 370 Merewether (H04)
The University of Sydney
Sydney, NSW 2006 2008
Australia

New York University (NYU) - Center for Neuroeconomics ( email )

4 Washington Place, Room 809
New York, NY 10003
United States

Xueting Wang (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

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