Dr. Heiner Mikosch - Seminar Presentation

Prof. Jie Zheng

Date and Time: December 14th, 2017, 10:00 - 11:30 pm

Room: A 101 in the Economics Building (Museum)

 

Abstract

How does an individual`s position within a social distribution influence their desire to take risk? Reference-dependent loss aversion (Kahnemann and Tversky, 1979; Koszegi and RAbin, 2006, 2007) adapted to a social setting, suggests that individuals may find risk more appealing when they are doing especially well or poorly compared to their peers. We examine the effects of a social position on risk attitudes in a simple experiment which allows subjects to take risks at different locations in the social distribution against a backdrop of real effort tasks.

Subjects` reference point under the loss aversion assumption is inferred from their empirical risk-taking patterns. Among low opportunity (expected earnings) subjects, we find a convex relationship (expected earnings) subjects, riks taking tends to be concave in social position, consistent with having a reference-point near the social median. For high opportunity (expected earnings) subjects, risk taking tends to be concave in social position, consistent with having a reference-point near the top of the social distribution. These patterns are not present in the control groups where no social information is provided to subjects. We find supporting evidence for our experimental results using the National Longitudinal Survey of Youth (NLSY 97), in which similar patterns of risk tendencies across the income distributio are reported among college and non-college educated respondents in the US.

About the speaker

Prof. Jie Zheng is Assistant Professor at Tsinghua University. His research interests are Economic Theory, Information Economics, Experimental Economics, Behavioral Economics, Financial Economics, Industrial Organization. He is the associate editor of the Journal of Economic Behavior and Organization.