Peer Effects in Risk Taking

Amrei M. Lahno and Marta Serra-Garcia

No 4057, CESifo Working Paper Series from CESifo

Abstract: We examine peer effects in risk taking with complete information and compare explanations for peer effects based on relative payoff concerns to explanations that allow peer choices to matter. We vary experimentally whether individuals can condition a simple lottery choice on the lottery choice, lottery allocation or an unrelated act of a peer. We find that peer effects increase significantly, almost double, when peers make choices, relative to when they are allocated a lottery. In contrast, peer effects are equally strong when individuals can condition on the lottery allocation or unrelated act of the peer. Further, imitation is the most frequent form of peer effect. Hence, peer effects in our environment are explained by a combination of relative payoff concerns and preferences that depend on peer choices. Comparative statics analyses and structural estimation results suggest that a norm to conform to the peer may explain why peer choices matter.

Keywords: peer effects; decision making under risk; social comparison; laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 C92 D03 D83 G02 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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