Loss Aversion in Social Image Concerns

49 Pages Posted: 1 Dec 2020

See all articles by Vasilisa Petrishcheva

Vasilisa Petrishcheva

affiliation not provided to SSRN

Gerhard Riener

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Hannah Schildberg-Hörisch

Heinrich-Heine-Universität Düsseldorf; IZA Institute of Labor Economics

Abstract

This paper explores whether loss aversion applies to social image concerns. In a simple model, we combine loss aversion in social image concerns and attitudes towards lying. We then test its predictions in a laboratory experiment. Subjects are first ranked publicly in a social image relevant domain, intelligence. This initial rank serves as within-subject reference point. After inducing an exogenous change in subjects' rank across treatments, subjects are offered scope for lying to improve their final rank. We find evidence for loss aversion in social image concerns. Subjects who face a loss in social image lie more than those experiencing gains if they sufficiently care about social image and have a reputation to lose. Individual-level analyses document a discontinuity in lying behavior when moving from rank losses to gains, indicating a kink in the value function for social image.

JEL Classification: C91, D91

Suggested Citation

Petrishcheva, Vasilisa and Riener, Gerhard and Schildberg-Hörisch, Hannah, Loss Aversion in Social Image Concerns. IZA Discussion Paper No. 13896, Available at SSRN: https://ssrn.com/abstract=3738838

Vasilisa Petrishcheva (Contact Author)

affiliation not provided to SSRN

No Address Available

Gerhard Riener

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Hannah Schildberg-Hörisch

Heinrich-Heine-Universität Düsseldorf ( email )

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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