Risk taking after absolute and relative wealth changes: The role of reference point adaptation
Hong Chao (),
Chun-Yu Ho () and
Xiangdong Qin ()
Additional contact information
Hong Chao: Shanghai Jiao Tong University
Xiangdong Qin: Shanghai Jiao Tong University
Journal of Risk and Uncertainty, 2017, vol. 54, issue 2, No 4, 157-186
Abstract We conducted an experiment to compare subjects’ attitudes toward risk before and after they experienced wealth changes induced by a real-effort task. We identified and estimated the subjects’ levels of reference point adaptation to absolute and relative wealth changes. We found that after experiencing a larger loss than others, the subjects did not completely adapt their reference points to the absolute wealth loss and the relative negative wealth gap, and thus significantly increased their risk-taking behavior. However, the subjects also did not adjust their attitudes toward risk after experiencing a smaller loss than others, a smaller gain than others, or a larger gain than others. This may be because they promptly adapted to wealth changes or because they did not adapt to wealth changes but the effects of absolute and relative wealth changes mostly offset each other.
Keywords: Risk attitude; Reference point adaptation; Prior outcome; Social comparison; Wealth changes; C1; C91; D03; D81 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s11166-017-9257-z Abstract (text/html)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:jrisku:v:54:y:2017:i:2:d:10.1007_s11166-017-9257-z
Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11166/PS2
Access Statistics for this article
Journal of Risk and Uncertainty is currently edited by W. Kip Viscusi
More articles in Journal of Risk and Uncertainty from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().