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
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.
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.
| Original language | English |
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| Place of Publication | Maastricht |
| Publisher | Maastricht University, Graduate School of Business and Economics |
| Number of pages | 33 |
| DOIs | |
| Publication status | Published - 1 Jan 2015 |
Publication series
| Series | GSBE Research Memoranda |
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| Number | 042 |