Interpersonal Comparisons and Risk Attitudes in the Field

2018

We study the impact of interpersonal comparisons on risk attitudes in a field experiment. Each decision maker (DM) is randomly paired with someone else in her neighborhood and makes a series of decisions that allow us to measure her risk attitudes under one of three conditions: In treatment 1, the DM’s payoff is above the neighbor’s payoff with certainty. In treatment 3, the DM’s payoff is below the neighbor’s payoff with certainty. In treatment 2, DM’s payment is either above or below depending on her choices and the realized outcomes of the lotteries involved. The neighbor’s payment is fixed within each treatment. We find that risk taking attitudes are affected by interpersonal comparisons. We argue these findings are consistent with simple extensions of the expected utility model to incorporate inequity aversion. In particular, we argue that DMs’ reluctance to be in a disadvantageous position with respect to her neighbor induces her to exhibit higher risk aversion.

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Recommended citation: Jaramillo, M., Lopez Vargas, K., (2018). "Interpersonal Comparisons and Risk Attitudes in the Field." Working Paper