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Social Reference Points and Risk Taking

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  • Schwerter, Frederik

Abstract

We test whether social reference points impact individual risk taking. In a laboratory experiment, decision makers observe the earnings of a peer subject before making a risky choice. We exogenously manipulate the peer earnings across two treatments. We find a significant treatment effect on risk taking: decision makers vary their risk taking in order to surpass or stay ahead of their peer. Our findings are consistent with a social-comparison-based, reference-dependent preference model that formalizes relative concerns via social loss aversion. Additionally, we relate our findings to the impact of private reference points on risk taking.

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  • Schwerter, Frederik, 2015. "Social Reference Points and Risk Taking," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112889, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:112889
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    Cited by:

    1. Simon Gächter & Lingbo Huang & Martin Sefton, 2018. "Disappointment Aversion And Social Comparisons In A Real‐Effort Competition," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1512-1525, July.
    2. Alexandros Karakostas & Giles Morgan & Daniel John Zizzo, 2023. "Socially interdependent risk taking," Theory and Decision, Springer, vol. 95(3), pages 365-378, October.
    3. Schmidt, Ulrich & Friedl, Andreas & Eichenseer, Michael & Lima de Miranda, Katharina, 2021. "Social comparison and gender differences in financial risk taking," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 58-72.
    4. Zeng Lian & Jaimie W. Lien & Lin Lu & Jie Zheng, 2021. "International trade with social comparisons," Review of International Economics, Wiley Blackwell, vol. 29(3), pages 533-556, August.

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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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