Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/155761
Authors: 
Müller, Stephan
Rau, Holger A.
Year of Publication: 
2017
Series/Report no.: 
Discussion Papers, Center for European, Governance and Economic Development Research 290
Abstract: 
This paper theoretically and experimentally studies decision-making in risky and social environments. We explore the interdependence of individual risk attitudes and social preferences in the form of inequality aversion as two decisive behavioral determinants in such contexts. Our model and the data demonstrate that individual risk aversion is attenuated when lagging behind peers, whereas it is amplified under favorable income inequality. Moreover, people's choices are not only contextdependent, but are sensitive to their degree of inequality aversion. The majority of our experimental findings cannot be rationalized by rank-dependent utility models or cumulative prospect theory. Our results contribute to the basic understanding of the underlying motives of private households' saving decisions, employees' careertrack choices or charitable giving under uncertainty.
Subjects: 
choice under uncertainty
social comparison
inequality aversion
risk preferences
JEL: 
C91
D03
D63
D81
Document Type: 
Working Paper

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