Status, Control Beliefs, and Risk Taking

68 Pages Posted: 19 Aug 2021

See all articles by Dietmar Fehr

Dietmar Fehr

Heidelberg University - Alfred Weber Institute for Economics

Yannick Reichlin

European University Institute

Date Written: 2021

Abstract

We show that relative standing in the wealth distribution shapes individuals’ willingness to take risks. Using a large-scale representative survey, we manipulated respondents’ perceived relative standing by randomly varying the range of response categories when asking about their wealth level. Respondents who are induced to perceive their relative wealth as low display more tolerance towards risk in a subsequent incentivized lottery task. This effect is mainly driven by individuals who more firmly believe that life outcomes are beyond their control. This heterogeneity in individual-specific beliefs highlights the benefits of incorporating personality constructs into economic analysis.

Keywords: relative wealth, risk preferences, survey experiment, locus of control

JEL Classification: D310, D630, D810, D910, E210, I310

Suggested Citation

Fehr, Dietmar and Reichlin, Yannick, Status, Control Beliefs, and Risk Taking (2021). CESifo Working Paper No. 9253, Available at SSRN: https://ssrn.com/abstract=3907737 or http://dx.doi.org/10.2139/ssrn.3907737

Dietmar Fehr (Contact Author)

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

Yannick Reichlin

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

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