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Social comparison and risk taking behavior

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  • Astrid Gamba

    (Department of Economics, University of Milan Bicocca)

  • Elena Manzoni

    (Department of Economics, University of Milan Bicocca)

Abstract

This paper studies the effect of social comparison on risk taking behavior. We assume that decision makers evaluate consequences of their choices not only as variations with respect to their economic status but also as variations with respect to the status of their peers. We test experimentally whether different positions in the social ranking determine different risk attitudes. Decision makers interact in a workplace environment, where they receive possibly different wages as compensations for a certain effort and then undertake a risky decision that may give them an extra gain. We find that relative pay comparisons affect decision makers' risk attitudes. In particular, both downward and upward pay comparisons generate more risk loving behavior.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2014-001.

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Date of creation: 29 Jan 2014
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Handle: RePEc:jrp:jrpwrp:2014-001

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Keywords: Social comparison; risk aversion; interdependent preferences; reference point;

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