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The effect of social comparison on debt taking: Experimental evidence

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  • Grohmann, Antonia
  • Koch, Melanie

Abstract

A number of studies show a link between social comparison and high levels of household debt. However, the exact underlying mechanisms are not yet well understood. In this paper, we disentangle two mechanisms in a lab experiment to study the effects of social image concerns and peer information on debt-financed consumption choices. We find that having to announce their consumption decisions publicly does not make participants more likely to take on debt. However, in an exploratory analysis, we uncover that it makes them more likely to buy a lower quality product than they can afford. We find no significant effects for information about other participants consumption on choices.

Suggested Citation

  • Grohmann, Antonia & Koch, Melanie, 2025. "The effect of social comparison on debt taking: Experimental evidence," Journal of Behavioral and Experimental Finance, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:beexfi:v:48:y:2025:i:c:s2214635025000929
    DOI: 10.1016/j.jbef.2025.101111
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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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