Peer effects in risk taking: Envy or conformity?
We examine two explanations for peer effects in risk taking: relative payoff concerns and preferences that depend on peer choices. We vary experimentally whether individuals can condition a simple lottery choice on the lottery choice or the lottery allocation of a peer. We find that peer effects increase significantly, almost double, when peers make choices, relative to when they are allocated a lottery. In both situations, imitation is the most frequent form of peer effect. Hence, peer effects in our environment are explained by a combination of relative payoff concerns and preferences that depend on peer choices. Comparative statics analyses and structural estimation results suggest that a norm to conform to the peer may explain why peer choices matter. Our results suggest that peer choices are important in generating peer effects and hence have important implications for modeling as well as for policy.
KeywordsPeer effects Decision making under risk Social comparison Laboratory experiment
JEL ClassificationsC91 C92 D03 D83 G02
We would like to thank Kenneth Ahern, Jim Andreoni, Daniel Clarke, Dirk Engelmann, Florian Englmaier, Fabian Herweg, Alex Imas, Martin Kocher, Johannes Maier, Jan Potters, Justin Sydnor, Stefan Trautmann, Lise Vesterlund and Joachim Winter for their useful comments as well as seminar participants at Royal Holloway, University of Bamberg, University of Gothenburg, University of Innsbruck, University of Munich, University of Pittsburgh, at the 2014 AEA Meetings, 2012 CESifo Area Conference on Behavioural Economics, 2012 European and North-American ESA Meetings, 7 t h Nordic Conference in Behavioral and Experimental Economics in Bergen, ESI Workshop on Experimental Economics II, the CEAR/MRIC Behavioral Insurance Conference 2012, the Risk Preferences and Decisions under Uncertainty SFB 649 Workshop, the 2013 theem meeting in Kreutzlingen, and the 2013 Workshop on Behavioral and Experimental Economics in Florence. We gratefully acknowledge funding from the Fritz Thyssen Foundation (Project AZ.10.12.2.097).
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