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Peer Effects in Risk Taking

Author

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  • Lahno, Amrei M.
  • Serra-Garcia, Marta

Abstract

This paper examines the effect of peers on individual risk taking. In the absence of informational motives, we investigate why social utility concerns may drive peer effects. We test for two main channels: utility from payoff differences and from conforming to the peer. We show experimentally that social utility generates substantial peer effects in risk taking. These are mainly explained by utility from payoff differences, in line with outcomebased social preferences. Contrary to standard assumptions, we show that estimated social preference parameters change significantly when peers make active choices, compared to when lotteries are randomly assigned to them.

Suggested Citation

  • Lahno, Amrei M. & Serra-Garcia, Marta, 2012. "Peer Effects in Risk Taking," Discussion Papers in Economics 14309, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:14309
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    File URL: https://epub.ub.uni-muenchen.de/14309/1/Lahno_Serra-Garcia_2012_Peer_Effects_in_Risk_Taking_121220.pdf
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    References listed on IDEAS

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    1. Peer Effects in Risk Taking
      by inobrec in Knowledge Team on 2013-01-09 19:04:46

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    Cited by:

    1. Delfino, Alexia & Marengo, Luigi & Ploner, Matteo, 2016. "I did it your way. An experimental investigation of peer effects in investment choices," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 113-123.
    2. Schmidt, Ulrich & Friedl, Andreas & Lima de Miranda, Katharina, 2015. "Social comparison and gender differences in risk taking," Kiel Working Papers 2011, Kiel Institute for the World Economy (IfW).
    3. Bougheas, Spiros & Nieboer, Jeroen & Sefton, Martin, 2015. "Risk taking and information aggregation in groups," Journal of Economic Psychology, Elsevier, vol. 51(C), pages 34-47.
    4. Bougheas, Spiros & Nieboer, Jeroen & Sefton, Martin, 2013. "Risk-taking in social settings: Group and peer effects," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 273-283.
    5. Schmidt, Ulrich & Neyse, Levent & Aleknonyte, Milda, 2015. "Income Inequality and Risk Taking," MPRA Paper 64913, University Library of Munich, Germany.

    More about this item

    Keywords

    Peer Effects; Decision Making under risk; Social Comparison; Social Preferences; Laboratory Experiment;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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