Template-type: ReDif-Paper 1.0
Author-Name: Mengel, F.
Author-workplace-name: Microeconomics & Public Economics
Author-Name: Peeters, R.J.A.P.
Author-workplace-name: Microeconomics & Public Economics
Title: Do markets encourage risk-seeking behaviour?
Abstract: Excessive risk taking in markets can have devastating consequences as recent financial crises have high-lighted. In this paper we ask whether markets as an institution encourage such excessive risk taking. To establish causality, we isolate the effects of market interaction in a laboratory experiment keeping other<br/>possibly confounding factors constant. We find that the opposite is true. Markets decrease participants' willingness to take risks. This finding can be explained by social comparison utility in the presence of negatively correlated risks and we provide evidence for such a mechanism.
Series: GSBE Research Memoranda
Creation-Date: 20150101
Number: 042
File-URL: https://cris.maastrichtuniversity.nl/ws/files/1191902/guid-c678758f-a356-4d00-99b5-613ed72ffb77-ASSET1.0.pdf
File-Format: application/pdf
File-Size: 1416727
Handle: Repec:unm:umagsb:2015042
DOI: 10.26481/umagsb.2015042