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Relative versus absolute income, joy of winning, and gender: Brain imaging evidence

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  • Dohmen, Thomas
  • Falk, Armin
  • Fliessbach, Klaus
  • Sunde, Uwe
  • Weber, Bernd

Abstract

In this paper we study the role of absolute versus relative income using functional magnetic resonance imaging (fMRI). While being scanned in two adjacent MRI scanners, pairs of subjects had to simultaneously perform a simple estimation task that entailed monetary rewards for correct answers. We show that a variation in the comparison subject's payment affects blood oxygenation level-dependent (BOLD) responses in the ventral striatum. This brain region is engaged in the prediction and registration of primary rewards such as food delivery as well as more abstract forms of rewards like money. In particular, we show that activation in the ventral striatum increases in absolute income and – for a given level of absolute income – decreases in lower relative income. Using a male and a female sample allows us to study whether the perception of relative and absolute incomes is gender specific. We find that the effects of absolute and relative incomes are strong and relatively similar for both genders. Finally, we analyze the importance of “joy of winning”, i.e., the impact of outperforming another subject. Our results suggest that the mere fact of outperforming the other subject positively affects reward related brain areas.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 95 (2011)
Issue (Month): 3 ()
Pages: 279-285

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Handle: RePEc:eee:pubeco:v:95:y:2011:i:3:p:279-285

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: Relative income; Joy of winning; Gender; fMRI; Neuroeconomics; Welfare economics;

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  1. Clark, Andrew E. & Oswald, Andrew J., 1994. "Satisfaction and comparison income," CEPREMAP Working Papers (Couverture Orange) 9408, CEPREMAP.
  2. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
  3. Uri Gneezy & Muriel Niederle & Aldo Rustichini, 2003. "Performance In Competitive Environments: Gender Differences," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1049-1074, August.
  4. Boskin, Michael J & Sheshinski, Eytan, 1978. "Optimal Redistributive Taxation when Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, MIT Press, vol. 92(4), pages 589-601, November.
  5. Benny Moldovanu & Aner Sela & Xianwen Shi, 2007. "Contests for Status," Journal of Political Economy, University of Chicago Press, vol. 115, pages 338-363.
  6. Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away from Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1067-1101, 08.
  7. David Neumark & Andrew Postlewaite, 1995. "Relative Income Concerns and the Rise in Married Women's Employment," NBER Working Papers 5044, National Bureau of Economic Research, Inc.
  8. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-29, September.
  9. Olof Johansson-Stenman & Fredrik Carlsson & Dinky Daruvala, 2002. "Measuring Future Grandparents" Preferences for Equality and Relative Standing," Economic Journal, Royal Economic Society, vol. 112(479), pages 362-383, April.
  10. Armin Falk & Andrea Ichino, 2006. "Clean Evidence on Peer Effects," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 39-58, January.
  11. Robert H. Frank, 1984. "Interdependent Preferences and the Competitive Wage Structure," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 510-520, Winter.
  12. Kräkel, Matthias, 2008. "Emotions in tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 204-214, July.
  13. Fliessbach, Klaus & Weber, Bernd & Trautner, P. & Dohmen, Thomas J. & Sunde, Uwe & Elger, C. E. & Falk, Armin, 2007. "Social comparison affects reward-related brain activity in the human ventral striatum," Munich Reprints in Economics 20362, University of Munich, Department of Economics.
  14. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
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  1. Ein wissenschaftlicher Rückschritt
    by Ekkehart Schlicht in Funktionale Staatsfinanzen on 2014-07-23 05:27:00
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