Abstract
Decisions under risk are often embedded in a social context that we usually abstract from when studying decision-making in the laboratory. In contrast to that practice, our experiment investigates whether risk-taking is affected by social comparisons. In particular, we focus on situations where some amount of money has to be allocated to two parties: either the amount can be shared, or a random device allocates the entire amount to one of the parties. We find that the social context of the decision matters strongly: When participants are in a disadvantageous initial position compared to the other party, they select the risky option much more often than in a purely individual decision, identical in all other respects. Overall, we find that individuals are relatively more risk-seeking in the socially unfavorable domain than in isolation, in contrast to the favorable one, where we find no or little change in elicited risk attitudes in comparison to an isolated decision.
Highlights
Most decisions under risk take place in a social context
Our paper analyzes the influence of the relative social position of a decisionmaker on her elicited risk attitudes, using a new experimental protocol that allows for additional insights
Our data suggest that risk-taking is influenced by the relative social situation of the decision-maker
Summary
Most decisions under risk take place in a social context. Other individuals than the decision-makers themselves are present or involved when decision-makers have to make choices under risk In these situations, other individuals or their behavior may, directly or indirectly, influence the decision-maker and her decisions (Trautmann and Vieider 2012).. One channel through which social context may affect decision under risk is the possibility of social comparison. The question of whether elicited risk attitudes are affected by the relative social position of the decision-maker arises. The existing empirical literature on this question is inconclusive, despite the ubiquity of day-to-day decisions under risk for which social comparisons are possible. Our paper analyzes the influence of the relative social position of a decisionmaker on her elicited risk attitudes, using a new experimental protocol that allows for additional insights
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