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Peer Effects in Risk Taking

  • Amrei M. Lahno
  • Marta Serra-Garcia

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.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4057.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_4057
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