You Are Not Alone: Experimental Evidence on Risk Taking When Social Comparisons Matter

Harald W. Lang

Working Papers from Max Planck Institute for Tax Law and Public Finance

Abstract: We provide experimental evidence that social comparisons affect individual risk taking. In particular, we focus on the case when individuals care about their income-rank. Our model predicts that compared to standard expected utility theory income-rank comparisons lead to less (more) risk taking in case of lotteries with more probability mass on the downside (upside) of the distribution. Evidence shows in line with our predictions that individuals take less risk when lotteries have more probability weight on the downside. However, we do not find an effect for lotteries with more upside probability mass. The effect of social comparisons on risk taking is strongest when the deciding subject and the reference subject are of the same gender.

Keywords: Social comparisons; individual risk taking; status; portfolio choice; relative income concerns; experiment (search for similar items in EconPapers)
JEL-codes: C91 D03 D81 G11 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2016-11
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-soc and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:mpi:wpaper:tax-mpg-rps-2016-12

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