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

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

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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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20040.

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Date of creation: 2011
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Publication status: Published in Journal of Public Economics 3-4 95(2011): pp. 279-285
Handle: RePEc:lmu:muenar:20040
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  1. ehiel, Philippe & Benny Moldovanu & Ennio Stacchetti, 1994. "How (not) to sell nuclear weapons," Discussion Paper Serie B 288, University of Bonn, Germany.
  2. Moldovanu, Benny & Sela, Aner & Shi, Xianwen, 2005. "Contests for Status," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 139, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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  5. Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away from Competition? Do Men Compete too Much?," Discussion Papers 04-030, Stanford Institute for Economic Policy Research.
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  9. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
  10. Clark, Andrew E. & Oswald, Andrew J., 1994. "Satisfaction and comparison income," CEPREMAP Working Papers (Couverture Orange) 9408, CEPREMAP.
  11. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  12. 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.
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