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Financial risk-taking related to individual risk preference, social comparison and competition

Tommy Gärling (Centre of Finance, University of Gothenburg, Göteborg, Sweden)
Dawei Fang (Centre of Finance, University of Gothenburg, Göteborg, Sweden)
Martin Holmen (Centre of Finance, University of Gothenburg, Göteborg, Sweden)
Patrik Michaelsen (Department of Psychology, University of Gothenburg, Göteborg, Sweden)

Review of Behavioral Finance

ISSN: 1940-5979

Article publication date: 17 April 2020

Issue publication date: 27 April 2021




The purpose of this paper is to investigate how social comparison and motivation to compete account for elevated risk-taking in fund management corroborated by asset market experiments when performance depends on rank-based incentives.


In two laboratory experiments, university students (n1 = 240/n2 = 120) make choices between risky and certain outcomes of hypothetical sums of money. Both experiments investigate in which direction risky choices in an individual condition (individual risk preference) are shifted when participants compare their performance to another participant's performance (social comparison), being instructed or not to outperform the other (incentive to compete).


In the absence of incentives to compete, participants tend to minimize the differences between expected outcomes to themselves and to the other, but when provided with incentives to compete, they tend to maximize these differences. An independent additional increase in risk-taking is observed when participants are provided with incentives to compete.


Original findings include that social comparison does not evoke motivation to compete unless incentives are offered and that increases in risk-taking depend both on what the other chooses and the incentives.



This research was financially supported by Grant No. 2010-02449 to the Centre for Finance, School of Business, Economics, and Law, University of Gothenburg, Göteborg, Sweden, from the Swedish Governmental Agency for Innovation Systems (VINNOVA), and Grant No. 2015-01713 to Martin Holmen from the Swedish Research Council.The paper was presented at the Behavioral Finance Working Group conference at Queen Mary University of London, June 12-13, 2017. We thank a discussant and other participants for comments.


Gärling, T., Fang, D., Holmen, M. and Michaelsen, P. (2021), "Financial risk-taking related to individual risk preference, social comparison and competition", Review of Behavioral Finance, Vol. 13 No. 2, pp. 125-140.



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