Social Reference Points and Risk Taking

Social reference points have been identified to be important determinants of individuals’ welfare. We investigate the consequences social for risk taking in a laboratory experiment. In main treatments, risk-taking subjects observe predetermined earnings peer when making risky choice. exogenously manipulate peers’ and find significant treatment effect: decision makers make less risk-averse choices case larger earnings. The effect is consistent with an application prospect theory cannot explained by based on counterfactual information, anchoring, experimenter demand effects. additional analyses, we show that diminishing sensitivity seems play role subjects’ choices. explore also whether inequity aversion expectations-based can account our findings conclude they do not provide plausible alternative explanations them. This paper was accepted Yan Chen, behavioral economics analysis. Funding: research financially supported Bonn Graduate School Economics Center Neuroscience Bonn. Supplemental Material: online appendix data are available at https://doi.org/10.1287/mnsc.2023.4698 .