Social comparison and gender differences in financial risk taking

Abstract

The present paper contributes to the controversy regarding gender differences in risk taking by investigating the impact of social comparison. Drawing on previous results from evolutionary biology, we argue that the social ranking is more important for men than for women, i.e. men (women) should focus more on relative (absolute) income. We develop a corresponding model of decision making under risk which predicts that risk taking is higher (lower) for positively (negatively) correlated risks than for uncorrelated risks and that this effect is stronger for men than for women. These predictions are confirmed by our first experiment. Building upon the first experiment, we show in a second experiment that we can make gender differences to appear or disappear by changing the social context in a systematic way. We conclude that social comparison and the correlation of risks may play an important role for the occurrence of gender differences in risk taking.