Social comparison and risky choices |
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Authors: | Jona Linde Joep Sonnemans |
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Institution: | (1) CREED, Amsterdam School of Economics, University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands |
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Abstract: | 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. |
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Keywords: | |
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