You are not alone: experimental evidence on risk taking when social comparisons 
matter

Lang, Harald

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You are not alone: experimental evidence on risk taking when social comparisons matter

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Lang, Harald
Public Economics, MPI for Tax Law and Public Finance, Max Planck Society;

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https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2876504
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Citation

Lang, H. (2016). You are not alone: experimental evidence on risk taking when social comparisons matter. Working Paper of the Max Planck Institute for Tax Law and Public Finance, No. 2016-12.

Cite as: https://hdl.handle.net/11858/00-001M-0000-002C-44E6-2

Abstract

We provide experimental evidence that social comparisons affect individual risk taking. In particular, we focus on the case when individuals care about their income-rank. Our model predicts that compared to standard expected utility theory income-rank comparisons lead to less (more) risk taking in case of lotteries with more probability mass on the downside (upside) of the distribution. Evidence shows in line with our predictions that individuals take less risk when lotteries have more probability weight on the downside. However, we do not find an effect for lotteries with more upside probability mass. The effect of social comparisons on risk taking is strongest when the deciding subject and the reference subject are of the same gender.