Does peer group size influence social preferences and risk taking?

Justin Roush, Rudy Santore and Stephen J. Cotten

Bulletin of Economic Research, 2019, vol. 71, issue 4, 573-584

Abstract: This paper examines whether the ex post relative payoffs of peers as well as the size of the peer group impact an agent's willingness to take risks. For example, persons in a flood plain may be less likely to purchase flood insurance if their neighbors also refrain from purchasing. We generalize the Fehr‐Schmidt (1999) model to allow the intensity of the social preferences to vary with the size of the peer group. Our experiment tests whether subjects are more or less likely to choose a lottery over a fixed payment when others have been assigned either the same lottery or the fixed payment. Using both between and within subject designs, we find risk‐taking behaviour is not responsive to the risks faced by others regardless of the size of peer group.

Date: 2019
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