Social comparison and risky choices

Theories (and experiments) on decision making under risk typically ignore (and exclude) a social context. We explore whether this omission is detrimental. To do so we experimentally investigate the simplest possible situation with both social comparison and risk: participants choose between two lott...

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Bibliographic Details
Published in:Journal of risk and uncertainty 2012-02, Vol.44 (1), p.45-72
Main Authors: Linde, Jona, Sonnemans, Joep
Format: Article
Language:English
Subjects:
Behavior
Behavioral economics
Decision making
Earnings
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Environmental Economics
Expected utility
Experiments
Loss aversion
Lotteries
Microeconomics
Nash equilibrium
Operations Research/Decision Theory
Preferences
Prospect theory
Referents
Risk
Risk aversion
Risk aversion preference
Social behaviour
Social comparison
Studies
Utility functions
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Summary:Theories (and experiments) on decision making under risk typically ignore (and exclude) a social context. We explore whether this omission is detrimental. To do so we experimentally investigate the simplest possible situation with both social comparison and risk: participants choose between two lotteries while a referent faces a fixed payoff. Participants are more risk averse when they can earn at most as much as their referent (loss situation) than when they are ensured they will earn at least as much as their referent (gain situation). Prospect theory with a social reference point would predict the exact opposite behavior. These results show that straightforward extensions of existing theories to allow for social comparison do not provide accurate predictions.
ISSN:0895-5646
1573-0476
DOI:10.1007/s11166-011-9135-z