Social Reference Points and Risk Taking

Frederik Schwerter

No 11/2013, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: This study test whether social reference points impact individual risk taking. In a laboratory experiment, decision makers observe the earnings of a peer subject before making a risky choice. We exogenously manipulate the peer earnings across two treatments. We find a significant treatment effect on risk taking: decision makers vary their risk taking in order to surpass or stay ahead of their peer. Our findings are consistent with a social-comparison-based, reference-dependent preference model that formalizes relative concerns via social loss aversion. Additionally, we relate our findings to the impact of private reference points on risk taking.

Keywords: Social Comparisons; Social Loss Aversion; Reference-Dependent Preferences; Lab Experiments; Relative Income Concerns (search for similar items in EconPapers)
JEL-codes: C91 D03 D81 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:112013

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