CeDEx 2013-04: Risk-taking in social settings: Group and peer effects (revised version of 2013-01)

Abstract

We investigate experimentally the effect of consultation (unincentivized advice) on choices under risk in an incentivized investment task. We compare consultation to two benchmark treatments: one with isolated individual choices, and a second with group choice after communication. Our benchmark treatments replicate findings that groups take more risk than individuals in the investment task; content analysis of group discussions reveals that higher risktaking in groups is positively correlated with mentions of expected value. In our consultation treatments, we find evidence of peer effects: decisions within the peer group are significantly correlated. However, average risk-taking after consultation is not significantly different from isolated individual choices. We also find that risk-taking after consultation is not affected by adding a feedback stage in which subjects see the choices of their consultation peers.

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Authors

Spiros Bougheas, Jeroen Nieboer and Martin Sefton

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