IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Peer Effects in Risk Taking

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

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://epub.ub.uni-muenchen.de/14309/1/Lahno_Serra-Garcia_2012_Peer_Effects_in_Risk_Taking_121220.pdf
Download Restriction: no

Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 14309.

as
in new window

Length:
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:lmu:muenec:14309
Contact details of provider: Postal: Ludwigstr. 28, 80539 Munich, Germany
Phone: +49-(0)89-2180-3405
Fax: +49-(0)89-2180-3510
Web page: http://www.vwl.uni-muenchen.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  2. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Scholarly Articles 3196332, Harvard University Department of Economics.
  3. Blanco, Mariana & Engelmann, Dirk & Normann, Hans-Theo, 2010. "A within-subject analysis of other-regarding preferences," DICE Discussion Papers 06, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  4. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2001. "Social Interaction and Stock-Market Participation," NBER Working Papers 8358, National Bureau of Economic Research, Inc.
  5. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences With Simple Tests," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 817-869, August.
  6. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," ESE Discussion Papers 92, Edinburgh School of Economics, University of Edinburgh.
  7. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  8. Alexandre Mas & Enrico Moretti, 2009. "Peers at Work," American Economic Review, American Economic Association, vol. 99(1), pages 112-45, March.
  9. Conte, Anna & Hey, John D. & Moffatt, Peter G., 2011. "Mixture models of choice under risk," Journal of Econometrics, Elsevier, vol. 162(1), pages 79-88, May.
  10. Steffen Huck & Joerg Oechssler, 1999. "Informational cascades in the laboratory: Do they occur for the right reasons?," Experimental 9901001, EconWPA.
  11. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
  12. Georgarakos, Dimitris & Haliassos, Michalis & Pasini, Giacomo, 2013. "Household debt and social interactions," SAFE Working Paper Series 1, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  13. Simon Gachter & Daniele Nosenzo & Martin Sefton, 2012. "Peer Effects in Pro-Social Behaviour: Social Norms or Social Preferences?," Discussion Papers 2012-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  14. Botond Koszegi & Matthew Rabin, 2006. "Reference-Dependent Risk Attitudes," Levine's Bibliography 122247000000001267, UCLA Department of Economics.
  15. Jona Linde & Joep Sonnemans, 2012. "Social comparison and risky choices," Journal of Risk and Uncertainty, Springer, vol. 44(1), pages 45-72, February.
  16. Chaim Fershtman & Uri Gneezy & John A. List, 2012. "Equity Aversion: Social Norms and the Desire to Be Ahead," American Economic Journal: Microeconomics, American Economic Association, vol. 4(4), pages 131-44, November.
  17. Trautmann, Stefan T., 2009. "A tractable model of process fairness under risk," Journal of Economic Psychology, Elsevier, vol. 30(5), pages 803-813, October.
  18. Armin Falk & Urs Fischbacher, . "A Theory of Reciprocity," IEW - Working Papers 006, Institute for Empirical Research in Economics - University of Zurich.
  19. Abhijit Banerjee & Arun G. Chandrasekhar & Esther Duflo & Matthew O. Jackson, 2012. "The Diffusion of Microfinance," NBER Working Papers 17743, National Bureau of Economic Research, Inc.
  20. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2008. "Social Decision Theory: Choosing within and between Groups," Carlo Alberto Notebooks 71, Collegio Carlo Alberto.
  21. David Card & Alexandre Mas & Enrico Moretti & Emmanuel Saez, 2012. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," American Economic Review, American Economic Association, vol. 102(6), pages 2981-3003, October.
  22. von Gaudecker, H.M. & van Soest, A.H.O. & Wengstrom, E., 2009. "Heterogeneity in Risky Choice Behavior in a Broad Population," Discussion Paper 2009-12, Tilburg University, Center for Economic Research.
  23. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Cowles Foundation Discussion Papers 719R, Cowles Foundation for Research in Economics, Yale University.
  24. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  25. Falk, Armin & Fischbacher, Urs, 2002. ""Crime" in the lab-detecting social interaction," European Economic Review, Elsevier, vol. 46(4-5), pages 859-869, May.
  26. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  27. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(2), pages 457-510.
  28. Noam Yuchtman & Florian Ederer & Bruno Ferman & Leonardo Bursztyn, 2013. "Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment," 2013 Meeting Papers 222, Society for Economic Dynamics.
  29. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-62, December.
  30. Celen, Bogachan & Kariv, Shachar, 2004. "Observational learning under imperfect information," Games and Economic Behavior, Elsevier, vol. 47(1), pages 72-86, April.
  31. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  32. Jordi Brandts & Gary Charness, 2011. "The strategy versus the direct-response method: a first survey of experimental comparisons," Experimental Economics, Springer, vol. 14(3), pages 375-398, September.
  33. Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, vol. 62(6), pages 1291-1326, November.
  34. repec:dgr:kubcen:200912 is not listed on IDEAS
  35. Felipe Kast & Stephan Meier & Dina Pomeranz, 2012. "Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device," NBER Working Papers 18417, National Bureau of Economic Research, Inc.
  36. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  37. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  38. GlennW. Harrison & StevenJ. Humphrey & Arjan Verschoor, 2010. "Choice under Uncertainty: Evidence from Ethiopia, India and Uganda," Economic Journal, Royal Economic Society, vol. 120(543), pages 80-104, 03.
  39. Graham Loomes, 2005. "Modelling the Stochastic Component of Behaviour in Experiments: Some Issues for the Interpretation of Data," Experimental Economics, Springer, vol. 8(4), pages 301-323, December.
  40. Peter Kuhn & Peter Kooreman & Adriaan Soetevent & Arie Kapteyn, 2011. "The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery," American Economic Review, American Economic Association, vol. 101(5), pages 2226-47, August.
  41. Glenn Harrison & E. Rutström, 2009. "Expected utility theory and prospect theory: one wedding and a decent funeral," Experimental Economics, Springer, vol. 12(2), pages 133-158, June.
  42. repec:ner:tilbur:urn:nbn:nl:ui:12-3857699 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:lmu:muenec:14309. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandra Frank)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.