The impact of (social) anchors on Prospect Theory’s value function

Sebastian Krull, David D. Loschelder and Matthias Pelster

The Quarterly Review of Economics and Finance, 2024, vol. 98, issue C

Abstract: Anchoring impacts risk-taking decisions. This paper provides experimental evidence (n = 744) that (social) anchors shift the Prospect Theory’s value function (Kahneman and Tversky, 1979; Tversky and Kahneman, 1992). We observe that extreme (social) anchors lead to shifts in the value function, indicating a change in risk-taking. Anchors that are in line with risk-averse (risk-seeking) behavior lead, relative to the baseline, to more risk-averse (risk-seeking) decisions. Our findings are similar for social and non-social environments.

Keywords: Decisions under risk; Risk-taking; Social interactions; Peer effects; Anchoring (search for similar items in EconPapers)
JEL-codes: G11 G40 G41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:98:y:2024:i:c:s1062976924001224

DOI: 10.1016/j.qref.2024.101916

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