This study test whether social reference points impact individual risk taking. In a laboratory experiment, decision makers observe the earnings of a peer subject before making a risky choice. We exogenously manipulate the peer earnings across two treatments. We find a significant treatment effect on risk taking: decision makers vary their risk taking in order to surpass or stay ahead of their peer. Our findings are consistent with a social-comparison-based, reference-dependent preference model that formalizes relative concerns via social loss aversion. Additionally, we relate our findings to the impact of private reference points on risk taking.
Social Comparisons Social Loss Aversion Reference-Dependent Preferences Lab Experiments Relative Income Concerns