Social comparison and risk taking behavior

This paper studies the effects of social comparison on risk taking behavior. In our theoretical framework, decision makers evaluate the consequences of their choices relative to both their own and their peers' conditions. We test experimentally whether the position in the social ranking affects risk attitudes. Subjects interact in a simulated workplace environment where they perform a work task, receive possibly different wages, and then undertake a risky decision that may produce an extra gain. We find that social comparison matters for risk attitudes. Subjects are more risk averse in the presence of small social gain than social loss. In addition, risk aversion is decreasing in the size of the social gain.